[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)](index=4&type=section&id=ITEM%201.%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(Unaudited)) Unaudited condensed consolidated financial statements and notes for VAALCO Energy, Inc. for Q2 2025 and FY2024 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20June%2030%2C%202025%20and%20December%2031%2C%202024) | Metric | As of June 30, 2025 (in thousands) | As of December 31, 2024 (in thousands) | | :----------------------------------- | :---------------------------------- | :----------------------------------- | | **Assets** | | | | Total current assets | $223,729 | $237,927 | | Crude oil, natural gas and NGLs properties and equipment, net | $587,263 | $538,103 | | Total assets | $964,922 | $954,950 | | **Liabilities** | | | | Total current liabilities | $160,917 | $181,728 | | Long-term debt | $60,000 | $— | | Total liabilities | $453,363 | $453,367 | | **Shareholders' Equity** | | | | Total shareholders' equity | $511,559 | $501,583 | - Total assets increased by approximately **$10 million** from December 31, 2024, to June 30, 2025, primarily driven by an increase in crude oil, natural gas, and NGLs properties and equipment, net, which rose by **$49.16 million**[10](index=10&type=chunk) - Long-term debt increased significantly from **$0** at December 31, 2024, to **$60 million** at June 30, 2025, reflecting new borrowings under the 2025 RBL Facility[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Crude oil, natural gas and NGLs sales | $96,893 | $116,778 | $207,222 | $216,933 | | Total operating costs and expenses | $79,711 | $96,510 | $163,846 | $162,993 | | Operating income | $17,182 | $20,400 | $43,376 | $53,906 | | Net income | $8,380 | $28,151 | $16,111 | $35,837 | | Basic net income per share | $0.08 | $0.27 | $0.15 | $0.34 | | Diluted net income per share | $0.08 | $0.27 | $0.15 | $0.34 | - Net income decreased significantly for both the three and six months ended June 30, 2025, compared to the same periods in 2024, primarily due to lower revenues and higher interest expenses[12](index=12&type=chunk) - Crude oil, natural gas, and NGLs sales decreased by **17%** for the three months and **4%** for the six months ended June 30, 2025, compared to the prior year, mainly due to lower realized prices and reduced sales volumes in certain segments[12](index=12&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) | Metric | Balance at January 1, 2025 (in thousands) | Balance at June 30, 2025 (in thousands) | Balance at January 1, 2024 (in thousands) | Balance at June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------- | :-------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Total Shareholders' Equity | $501,583 | $511,559 | $478,782 | $493,648 | | Net income (Q2 2025) | N/A | $8,380 | N/A | $28,151 | | Dividend distributions (Q2 2025) | N/A | $(6,557) | N/A | $(6,579) | | Other comprehensive loss (Q2 2025) | N/A | $4,759 | N/A | $(1,068) | - Total shareholders' equity increased from **$501.6 million** at January 1, 2025, to **$511.6 million** at June 30, 2025, driven by net income and other comprehensive income, partially offset by dividend distributions and treasury stock purchases[13](index=13&type=chunk) - Dividend distributions for the three months ended June 30, 2025, were **$6.56 million**, consistent with **$6.58 million** for the same period in 2024[13](index=13&type=chunk)[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $51,049 | $21,394 | | Net cash used in investing activities | $(107,460) | $(48,687) | | Net cash provided by (used in) financing activities | $32,922 | $(23,567) | | Net change in cash, cash equivalents and restricted cash | $(23,393) | $(51,093) | | Cash, cash equivalents and restricted cash at end of period | $74,333 | $78,085 | - Net cash provided by operating activities increased significantly to **$51.05 million** for the six months ended June 30, 2025, from **$21.39 million** in the prior year, primarily due to changes in operating assets and liabilities, including increased collections from Egypt receivables[15](index=15&type=chunk)[96](index=96&type=chunk) - Net cash used in investing activities increased to **$107.46 million** in 2025 from **$48.69 million** in 2024, driven by development drilling programs in Egypt and project costs for Gabon and Côte d'Ivoire[15](index=15&type=chunk)[97](index=97&type=chunk) - Financing activities shifted from a net use of **$23.57 million** in 2024 to a net provision of **$32.92 million** in 2025, mainly due to **$60 million** in proceeds from borrowings under the 2025 RBL Facility[15](index=15&type=chunk)[98](index=98&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) [1. Organization and Accounting Policies](index=10&type=section&id=1.%20ORGANIZATION%20AND%20ACCOUNTING%20POLICIES) - Vaalco Energy, Inc. is a Houston, Texas-based independent energy company focused on the acquisition, exploration, development, and production of crude oil, natural gas, and NGLs properties, with a diversified African-focused asset portfolio in Gabon, Egypt, Côte d'Ivoire, Nigeria, Equatorial Guinea, and producing properties in Canada[18](index=18&type=chunk) **Credit Loss Allowance Changes (in thousands):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Balance at beginning of period | $(2,527) | $(7,829) | $(2,554) | $(6,029) | | Credit losses and other | $(326) | $(3,341) | $(637) | $(5,153) | | Credit recoveries and other | $297 | $— | $635 | $— | | Foreign currency gain | $— | $(1,434) | $— | $(1,422) | | Balance at end of period | $(2,556) | $(12,604) | $(2,556) | $(12,604) | [2. New Accounting Standards](index=11&type=section&id=2.%20NEW%20ACCOUNTING%20STANDARDS) - The FASB issued new guidance in December 2023 to improve income tax disclosures, effective for annual periods beginning after December 15, 2024. The Company is evaluating its impact[25](index=25&type=chunk) - ASU 2024-03, issued in November 2024, requires disaggregation of income statement expenses, effective for annual periods beginning after December 15, 2026, and interim periods after December 15, 2027. Early adoption is permitted, and the Company is evaluating its impact[26](index=26&type=chunk) [3. Acquisitions](index=11&type=section&id=3.%20ACQUISITIONS) - In March 2025, the Company farmed into the CI-705 block offshore Côte d'Ivoire, becoming the operator with a **70%** working interest and **100%** paying interest for approximately **$3.0 million**[27](index=27&type=chunk) - In February 2025, the Company acquired the Baobab FPSO in Côte d'Ivoire for a total purchase price of **$20.0 million**, with a net cost to the Company of approximately **$5.5 million**[28](index=28&type=chunk) - The Svenska Acquisition was completed on April 30, 2024, for a net adjusted purchase price of **$40.2 million**, resulting in an initial bargain purchase gain of **$19.9 million**, later reduced by **$6.4 million** due to purchase price allocation adjustments[29](index=29&type=chunk)[30](index=30&type=chunk) [4. Segment Information](index=13&type=section&id=4.%20SEGMENT%20INFORMATION) - The Company's operations are segmented geographically across Gabon, Egypt, Côte d'Ivoire, Canada, Nigeria, and Equatorial Guinea, with performance evaluated primarily based on Operating income (loss)[35](index=35&type=chunk) **Operating Income (Loss) by Segment (Three Months Ended June 30, 2025, in thousands):** | Segment | Operating Income (Loss) | | :---------------- | :---------------------- | | Gabon | $20,658 | | Egypt | $10,845 | | Canada | $(972) | | Equatorial Guinea | $(798) | | Côte d'Ivoire | $(4,428) | | Corporate and Other | $(8,123) | | **Total** | **$17,182** | **Operating Income (Loss) by Segment (Six Months Ended June 30, 2025, in thousands):** | Segment | Operating Income (Loss) | | :---------------- | :---------------------- | | Gabon | $37,194 | | Egypt | $24,672 | | Canada | $(297) | | Equatorial Guinea | $(1,473) | | Côte d'Ivoire | $(489) | | Corporate and Other | $(16,231) | | **Total** | **$43,376** | [5. Earnings Per Share](index=16&type=section&id=5.%20EARNINGS%20PER%20SHARE) **Net Income Per Share (Three Months Ended June 30):** | Metric | 2025 | 2024 | | :---------------------------------- | :--- | :--- | | Basic net income per share | $0.08 | $0.27 | | Diluted net income per share | $0.08 | $0.27 | **Net Income Per Share (Six Months Ended June 30):** | Metric | 2025 | 2024 | | :---------------------------------- | :--- | :--- | | Basic net income per share | $0.15 | $0.34 | | Diluted net income per share | $0.15 | $0.34 | **Weighted Average Shares Outstanding (in thousands):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Basic weighted average shares outstanding | 103,936 | 103,528 | 103,848 | 103,594 | | Diluted weighted average shares outstanding | 103,958 | 103,676 | 103,872 | 103,677 | [6. Revenue](index=16&type=section&id=6.%20REVENUE) - The Company's oil entitlement under Production Sharing Contracts (PSCs) in Gabon, Egypt, Côte d'Ivoire, and Equatorial Guinea is generally the sum of cost oil, profit oil, and excess cost oil, with royalties paid out of the government's share of production[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) **Net Revenues by Segment (Three Months Ended June 30, in thousands):** | Segment | 2025 | 2024 | | :-------------- | :----- | :----- | | Gabon | $58,567 | $53,674 | | Egypt | $33,257 | $35,481 | | Canada | $4,715 | $10,384 | | Côte d'Ivoire | $353 | $17,240 | **Net Revenues by Segment (Six Months Ended June 30, in thousands):** | Segment | 2025 | 2024 | | :-------------- | :----- | :----- | | Gabon | $110,754 | $111,178 | | Egypt | $67,177 | $72,442 | | Canada | $10,895 | $16,073 | | Côte d'Ivoire | $18,396 | $17,240 | [7. Crude Oil, Natural Gas and NGLs Properties and Equipment, Net](index=20&type=section&id=7.%20CRUDE%20OIL%2C%20NATURAL%20GAS%20AND%20NGLs%20PROPERTIES%20AND%20EQUIPMENT%2C%20NET) **Crude Oil, Natural Gas and NGLs Properties and Equipment, Net (in thousands):** | Category | As of June 30, 2025 | As of December 31, 2024 | | :------------------------------------------ | :------------------ | :-------------------- | | Wells, platforms and other production facilities | $1,617,365 | $1,593,243 | | Work-in-progress | $105,131 | $44,517 | | Unproved properties | $66,576 | $60,761 | | Capitalized equipment, spare parts and other | $90,165 | $75,581 | | **Total gross properties and equipment** | **$1,879,237** | **$1,774,102** | | Accumulated depreciation, depletion, amortization and impairment | $(1,291,974) | $(1,235,999) | | **Net properties and equipment** | **$587,263** | **$538,103** | - Net crude oil, natural gas, and NGLs properties and equipment increased by **$49.16 million** from December 31, 2024, to June 30, 2025, primarily due to an increase in work-in-progress and wells, platforms, and other production facilities[55](index=55&type=chunk) [8. Derivatives and Fair Value](index=20&type=section&id=8.%20DERIVATIVES%20AND%20FAIR%20VALUE) - The Company uses commodity derivative instruments (swaps, costless collars, put options) to hedge price risk for a portion of its anticipated oil and gas production, primarily with counterparties that are also lenders under the 2025 RBL Facility[56](index=56&type=chunk)[102](index=102&type=chunk) **Outstanding Derivative Contracts as of June 30, 2025:** | Instrument | Index | July-Sep 2025 | Oct-Dec 2025 | Jan-Mar 2026 | Apr-Jun 2026 | | :-------------------------- | :---------- | :------------ | :----------- | :----------- | :----------- | | **Crude oil Swaps** | Dated Brent | 100,000 Bbls | — | — | — | | Weighted avg fixed price ($/Bbl) | | $65.45 | — | — | — | | **Crude oil Collars** | Dated Brent | 405,000 Bbls | 480,000 Bbls | 400,000 Bbls | 360,000 Bbls | | Weighted avg floor price ($/Bbl) | | $63.02 | $60.83 | $62.29 | $61.88 | | Weighted avg ceiling price ($/Bbl) | | $74.36 | $67.81 | $68.63 | $67.95 | | **Natural Gas Swaps** | AECO 7A | 342,000 GJs | 114,000 GJs | — | — | | Weighted avg fixed price (CAD/GJ) | | $2.15 | $2.15 | — | — | **Derivative Instruments Gain (Loss), Net (in thousands):** | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | $400 | $257 | | Six Months Ended June 30, | $326 | $(590) | [9. Current Accrued Liabilities and Other](index=22&type=section&id=9.%20CURRENT%20ACCRUED%20LIABILITIES%20AND%20OTHER) **Accrued Liabilities and Other Balances (in thousands):** | Category | As of June 30, 2025 | As of December 31, 2024 | | :------------------------------ | :------------------ | :-------------------- | | Accrued accounts payable invoices | $33,429 | $48,913 | | State oil liability | $18,244 | $19,616 | | Accrued capital expenditures | $14,763 | $8,923 | | Egypt modernization payable | $9,555 | $9,933 | | Gabon contractual obligations | $7,611 | $6,977 | | Accrued wages and other compensation | $4,496 | $4,956 | | Seismic data | $4,975 | $2,455 | | Asset retirement obligation, current portion | $183 | $1,174 | | Other | $6,637 | $4,763 | | **Total accrued liabilities and other** | **$99,893** | **$107,710** | - Total accrued liabilities and other decreased by **$7.82 million** from December 31, 2024, to June 30, 2025, primarily due to a reduction in accrued accounts payable invoices and the settlement of the Backdated Receivables[58](index=58&type=chunk)[147](index=147&type=chunk)[165](index=165&type=chunk) [10. Commitments and Contingencies](index=22&type=section&id=10.%20COMMITMENTS%20AND%20CONTINGENCIES) - The Company has a cash funding arrangement for abandonment of offshore wells, platforms, and facilities on the Etame Marin block in Gabon, with **$10.7 million** (**$6.3 million** net to Vaalco) funded as of June 30, 2025[59](index=59&type=chunk)[110](index=110&type=chunk) - The share buyback program, which allowed for up to **$30 million** in common stock purchases, was completed on March 12, 2024, with **6,797,711** shares purchased at an average price of **$4.41** per share[60](index=60&type=chunk) - Under the Merged Concession Agreement in Egypt, the Company is required to make a **$10.0 million** annual modernization payment to EGPC through February 1, 2026. The 2025 payment was offset against receivables, with one further payment due in 2026[61](index=61&type=chunk)[113](index=113&type=chunk) - The Company has exceeded its five-year minimum financial work commitments of **$50 million** in Egypt, with any excess carrying forward to offset against subsequent five-year commitments[61](index=61&type=chunk)[114](index=114&type=chunk) [11. Debt](index=23&type=section&id=11.%20DEBT) - In April 2025, the Company drew down **$60.0 million** under the 2025 RBL Facility, accruing interest at **10.8%** per annum (Term SOFR plus **6.5%** margin) and due within three months, with a rollover option[63](index=63&type=chunk) - As of June 30, 2025, **$60.0 million** was outstanding under the 2025 RBL Facility, compared to no outstanding borrowings at December 31, 2024[64](index=64&type=chunk) - The 2025 RBL Facility has aggregate commitments of **$190.0 million** and an initial borrowing base of **$184.0 million** (increased from **$182.0 million**), with **$126.6 million** of available borrowing capacity as of June 30, 2025[67](index=67&type=chunk) [12. Income Taxes](index=25&type=section&id=12.%20INCOME%20TAXES) **Effective Tax Rate (excluding discrete items):** | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | 52.91% | 43.78% | | Six Months Ended June 30, | 58.36% | 54.58% | - The effective tax rate for both periods in 2025 was higher than in 2024, primarily due to higher tax rates in foreign jurisdictions and non-deductible items[77](index=77&type=chunk) - Income tax expense for the three months ended June 30, 2025, included a **$3.1 million** favorable oil price adjustment related to Gabon's Profit Oil allocation, reducing the expense to **$7.0 million**[78](index=78&type=chunk) [13. Other Comprehensive Income](index=25&type=section&id=13.%20OTHER%20COMPREHENSIVE%20INCOME) - The Company's other comprehensive loss was **$4.8 million** and **$4.9 million** for the three and six months ended June 30, 2025, respectively, arising entirely from currency translation adjustments of the Canadian segment to USD[80](index=80&type=chunk) **Accumulated Other Comprehensive Income (in thousands):** | Metric | Amount | | :------------------------------------------ | :----- | | Balance at December 31, 2024 | $(4,962) | | Amounts reclassified from accumulated other comprehensive income (Jan-Mar 2025) | $117 | | Balance at March 31, 2025 | $(4,845) | | Amounts reclassified from accumulated other comprehensive income (Apr-Jun 2025) | $4,759 | | Balance at June 30, 2025 | $(86) | [14. Subsequent Event](index=25&type=section&id=14.%20SUBSEQUENT%20EVENT) - On July 4, 2025, the One Big Beautiful Bill Act of 2025 (OBBBA) was signed into law, making permanent key elements of the Tax Cuts and Jobs Act of 2017. The Company is evaluating its potential effects but does not anticipate any material financial impact[82](index=82&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=26&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management's discussion and analysis of financial condition, results of operations, and liquidity for Q2 2025 and 2024 [Cautionary Statement Regarding Forward-Looking Statements](index=26&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) - The report contains forward-looking statements regarding future operations, financial position, reserve quantities, market prices, and business strategy, which are subject to various risks and uncertainties[83](index=83&type=chunk) - Key risks include volatility in crude oil and natural gas prices, geopolitical events, ability to obtain financing, operating hazards, and compliance with governmental regulations[83](index=83&type=chunk)[88](index=88&type=chunk) - The Company disclaims any duty to update forward-looking statements to reflect events or circumstances occurring after the report date, except as required by law[86](index=86&type=chunk) [Introduction](index=27&type=section&id=INTRODUCTION) - Vaalco is a Houston, Texas-based, African-focused independent energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and NGLs, with assets in Gabon, Egypt, Equatorial Guinea, Nigeria, Côte d'Ivoire, and Canada[87](index=87&type=chunk) [Recent Developments](index=28&type=section&id=RECENT%20DEVELOPMENTS) - The Company paid a quarterly cash dividend of **$0.0625** per share for Q2 2025 and announced the same for Q3 2025, with future payments at the board's discretion[89](index=89&type=chunk) - Gabon's 2025/2026 drilling program is expected to begin near the end of Q3 2025, including development, appraisal/exploration wells, and workovers[90](index=90&type=chunk) - In Egypt, six wells were completed in Q2 2025 as part of a drilling campaign that began in December 2024, with three wells to be hydraulically fractured in Q3 2025[92](index=92&type=chunk) - The Baobab FPSO in Côte d'Ivoire ceased production on January 31, 2025, for planned dry dock refurbishment, with its return to service and significant development drilling expected in 2026[94](index=94&type=chunk) - The Company deferred additional drilling in Canada in 2025 to reallocate capital to projects with higher expected returns across its portfolio[93](index=93&type=chunk) [Capital Resources and Liquidity](index=29&type=section&id=CAPITAL%20RESOURCES%20AND%20LIQUIDITY) - Net cash provided by operating activities increased by **$29.7 million** to **$51.05 million** for the six months ended June 30, 2025, driven by changes in operating assets and liabilities, including increased collections from Egypt receivables[96](index=96&type=chunk) - Accrual basis capital expenditures for the six months ended June 30, 2025, were **$92.2 million**, up from **$46.5 million** in 2024, primarily for new wells in Egypt and FPSO dry dock preparation in Côte d'Ivoire[99](index=99&type=chunk) - The Company uses commodity derivative instruments to hedge price risk for a portion of its anticipated crude oil and gas production, as required by its 2025 RBL Facility[102](index=102&type=chunk) - As of June 30, 2025, the Company had **$67.9 million** in unrestricted cash and believes it has sufficient liquidity through existing cash, cash flow from operations, and the 2025 RBL Facility to support current cash requirements[103](index=103&type=chunk)[105](index=105&type=chunk) [Trends and Uncertainties](index=31&type=section&id=Trends%20and%20Uncertainties) - Geopolitical conflicts (Russia-Ukraine, Middle East) and Houthi attacks in the Red Sea have intensified volatility in oil/natural gas prices, lengthened material lead times, and increased prices, impacting global supply chains[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - New U.S. trade legislation in 2025, including significant tariff increases, may lead to increased costs and longer lead times for equipment and materials sourced through the U.S. or U.S.-aligned routes[119](index=119&type=chunk) - Despite a deceleration in sustainability regulation in the U.S., the Company expects continued focus on ESG and climate change issues, potentially leading to demand shifts away from fossil fuels and higher compliance costs[125](index=125&type=chunk)[127](index=127&type=chunk) - The SEC ended its defense of climate-related disclosure rules in March 2025, signaling a potential shift in U.S. regulatory direction, but the Company remains committed to transparency and TCFD-aligned reporting[128](index=128&type=chunk)[129](index=129&type=chunk) [Critical Accounting Policies and Estimates](index=33&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) - There have been no material changes to the Company's critical accounting policies and estimates since December 31, 2024[131](index=131&type=chunk) [New Accounting Standards](index=33&type=section&id=NEW%20ACCOUNTING%20STANDARDS) - Refer to Part I, Item 1, Note 2 for details on new accounting standards[132](index=132&type=chunk) [Results of Operations](index=33&type=section&id=RESULTS%20OF%20OPERATIONS) **Net Income (in thousands):** | Period | 2025 | 2024 | Change | | :-------------------------- | :----- | :----- | :------- | | Three Months Ended June 30, | $8,380 | $28,151 | $(19,771) | | Six Months Ended June 30, | $16,111 | $35,837 | $(19,726) | - Crude oil, natural gas, and NGLs revenues decreased by **$19.9 million** (**17%**) for the three months and **$9.7 million** (**4%**) for the six months ended June 30, 2025, primarily due to lower realized prices and reduced sales volumes in Côte d'Ivoire and Canada[134](index=134&type=chunk)[153](index=153&type=chunk) - Production expenses decreased by **$12.1 million** (**23%**) for the three months ended June 30, 2025, mainly due to reductions in Côte d'Ivoire, but increased by **$0.7 million** for the six months due to higher costs in Gabon[143](index=143&type=chunk)[161](index=161&type=chunk) - Exploration expense of **$2.5 million** for both periods in 2025 was attributable to seismic data purchase for Block 705 in Côte d'Ivoire, with minimal costs in 2024[144](index=144&type=chunk)[162](index=162&type=chunk) - Interest expense, net, increased to **$2.6 million** for the three months and **$3.9 million** for the six months ended June 30, 2025, primarily due to amortization of debt issue costs, commitment fees, and interest on the 2025 RBL Facility[149](index=149&type=chunk)[167](index=167&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=41&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Details the Company's exposure to market risks, including foreign exchange, counterparty, commodity price, and interest rate risks [Foreign Exchange Risk](index=41&type=section&id=FOREIGN%20EXCHANGE%20RISK) - The Company is exposed to foreign exchange risk from costs and liabilities denominated in Central African CFA Franc (XAF) in Gabon, Canadian dollars (CAD) in Canada, Egyptian pounds (EGP) in Egypt, and Swedish Krona (SEK) in Côte d'Ivoire[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - A **10%** weakening of the CFA relative to the U.S. dollar would reduce the value of net XAF liabilities by **$13.2 million** as of June 30, 2025[172](index=172&type=chunk) - The Company does not use derivative instruments to manage foreign exchange risk[176](index=176&type=chunk) [Counterparty Risk](index=41&type=section&id=COUNTERPARTY%20RISK) - The Company is exposed to counterparty risk on its open derivative instruments due to potential nonperformance, mitigated by entering into contracts with creditworthy financial institutions[177](index=177&type=chunk) [Commodity Price Risk](index=41&type=section&id=COMMODITY%20PRICE%20RISK) - The Company's financial performance is highly sensitive to volatile crude oil, natural gas, and NGLs prices, which can significantly impact revenue, profitability, and liquidity[178](index=178&type=chunk)[179](index=179&type=chunk) **Impact of $5/Bbl Decrease in Crude Oil Price on Revenues and Operating Income (Six Months Ended June 30, 2025, in Millions):** | Segment | 2025 Sales Volumes (Mbls) | Decrease in Revenues | Decrease in Operating Income (Increase in Operating Loss) | | :-------------- | :------------------------ | :------------------- | :------------------------------------------------------ | | Gabon | 1,558 | $7.8 | $7.0 | | Egypt | 1,334 | $6.7 | $4.0 | | Côte d'Ivoire | 238 | $1.2 | $0.6 | | Canada | 351 | $1.8 | $1.4 | | **Consolidated** | **3,481** | | | - No impairment was recorded at June 30, 2025, despite commodity price volatility, but prolonged low prices or negative reserve revisions could lead to future impairment charges[184](index=184&type=chunk)[185](index=185&type=chunk) [Interest Rate Risk](index=43&type=section&id=INTEREST%20RATE%20RISK) - The Company's primary interest rate exposure as of June 30, 2025, was from its **$60.0 million** outstanding borrowings under the 2025 RBL Facility, which accrues interest at a variable rate of **10.8%** per annum (Term SOFR plus **6.5%**)[188](index=188&type=chunk) - A **10%** increase in applicable average interest rates would have resulted in an estimated **$0.06 million** increase in interest expense for the period from drawdown through June 30, 2025[188](index=188&type=chunk) - The Company currently does not hedge its interest rate exposure[188](index=188&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=43&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Addresses effectiveness of disclosure controls, internal control over financial reporting, material weaknesses, and remediation plans [Evaluation of Disclosure Controls and Procedures](index=43&type=section&id=EVALUATION%20OF%20DISCLOSURE%20CONTROLS%20AND%20PROCEDURES) - As of June 30, 2025, the Company's disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting identified in the 2024 Annual Report on Form 10-K[189](index=189&type=chunk)[190](index=190&type=chunk) [Material Weakness in Internal Control Over Financial Reporting](index=44&type=section&id=MATERIAL%20WEAKNESS%20IN%20INTERNAL%20CONTROL%20OVER%20FINANCIAL%20REPORTING) - Material weaknesses include ineffective general information technology controls (GITCs) supporting the procure-to-pay system and ineffective design, implementation, or operation of process-level control activities related to the financial reporting process, specifically procure-to-pay[198](index=198&type=chunk) - Despite the material weaknesses, management concluded that the unaudited condensed consolidated financial statements for the period present fairly the Company's financial position, results of operations, and cash flows in accordance with GAAP[192](index=192&type=chunk) [Management's Plan for Remediation of the Material Weakness](index=44&type=section&id=MANAGEMENT'S%20PLAN%20FOR%20REMEDIATION%20OF%20THE%20MATERIAL%20WEAKNESS) - The Company is implementing a remediation plan to address the identified material weaknesses, but remediation will not be considered complete until controls operate effectively for a sufficient period and are tested[193](index=193&type=chunk) - Management is committed to investing significant time and resources to enhance the control environment and will continue to perform additional analyses to ensure financial statements comply with U.S. GAAP until remediation is complete[195](index=195&type=chunk) [Changes in Internal Control Over Financial Reporting](index=44&type=section&id=CHANGES%20IN%20INTERNAL%20CONTROL%20OVER%20FINANCIAL%20REPORTING) - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025, except for activities related to the remediation of the material weaknesses[196](index=196&type=chunk) [PART II. OTHER INFORMATION](index=44&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=44&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Discusses ordinary course litigation and governmental proceedings, with no anticipated material adverse financial effect - The Company is subject to ordinary course litigation and governmental/regulatory proceedings[197](index=197&type=chunk) - Management believes current claims and litigation are not likely to have a material adverse effect on the Company's unaudited condensed consolidated financial position, cash flows, or results of operations[197](index=197&type=chunk) [ITEM 1A. RISK FACTORS](index=45&type=section&id=ITEM%201A.%20RISK%20FACTORS) Highlights business risks, referencing 2024 Form 10-K, and introduces a new risk factor on discouraging third-party acquisitions - The Company's business is exposed to many risks, as discussed in its 2024 Form 10-K[199](index=199&type=chunk)[200](index=200&type=chunk) - A new risk factor identifies that provisions in production sharing contracts, joint operating agreements, and other agreements could discourage or prevent third-party acquisitions of the Company or its assets[201](index=201&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=45&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Confirms no previously unreported unregistered sales of equity securities during Q2 2025 - There were no unregistered sales of equity securities during the three months ended June 30, 2025, that were not previously reported on a Current Report on Form 8-K[202](index=202&type=chunk) [ITEM 5. OTHER INFORMATION](index=45&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No directors or officers adopted, terminated, or modified Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[203](index=203&type=chunk) [ITEM 6. EXHIBITS](index=46&type=section&id=ITEM%206.%20EXHIBITS) Lists exhibits filed with Form 10-Q, including organizational documents, stock awards, and SOX certifications - The exhibits include the Restated Certificate of Incorporation, Third Amended and Restated Bylaws, Form of Restricted Stock Award Agreement, Sarbanes-Oxley Section 302 and 906 certifications, and Inline XBRL documents[204](index=204&type=chunk)

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201%20Financial%20Statements) This section presents Dana's unaudited consolidated financial statements, including key financial highlights and the Off-Highway business reclassification [Consolidated Statement of Operations (Unaudited)](index=3&type=section&id=Consolidated%20Statement%20of%20Operations%20(Unaudited)) Net income for Q2 2025 increased to **$31 million** from **$16 million** in Q2 2024, driven by improved continuing operations **Net Income (Q2 YoY):** | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change | | :-------------------------------- | :----------------- | :----------------- | :----- | | Net income | $31 | $16 | +$15 | | Net income attributable to parent | $27 | $16 | +$11 | | Basic EPS | $0.19 | $0.11 | +$0.08 | | Diluted EPS | $0.19 | $0.11 | +$0.08 | **Net Income (YTD YoY):** | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | Change | | :-------------------------------- | :------------------ | :------------------ | :----- | | Net income | $61 | $16 | +$45 | | Net income attributable to parent | $52 | $19 | +$33 | | Basic EPS | $0.36 | $0.13 | +$0.23 | | Diluted EPS | $0.36 | $0.13 | +$0.23 | **Net Sales (Q2 YoY):** | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change | | :-------- | :----------------- | :----------------- | :----- | | Net sales | $1,935 | $2,047 | -$112 | **Net Sales (YTD YoY):** | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | Change | | :-------- | :------------------ | :------------------ | :----- | | Net sales | $3,716 | $4,062 | -$346 | [Consolidated Statement of Comprehensive Income (Unaudited)](index=4&type=section&id=Consolidated%20Statement%20of%20Comprehensive%20Income%20(Unaudited)) Total comprehensive income significantly improved to **$96 million** in Q2 2025 from a **$52 million loss** in Q2 2024, driven by currency translation and hedging gains **Total Comprehensive Income (Q2 YoY):** | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change | | :-------------------------- | :----------------- | :----------------- | :----- | | Total comprehensive income | $96 | $(52) | +$148 | **Total Comprehensive Income (YTD YoY):** | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | Change | | :-------------------------- | :------------------ | :------------------ | :----- | | Total comprehensive income | $158 | $(73) | +$231 | **Other Comprehensive Income (Loss) from Continuing Operations (Q2 YoY):** | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change | | :-------------------------- | :----------------- | :----------------- | :----- | | Currency translation adjustments | $35 | $(45) | +$80 | | Hedging gains and losses | $23 | $(26) | +$49 | [Consolidated Balance Sheet (Unaudited)](index=5&type=section&id=Consolidated%20Balance%20Sheet%20(Unaudited)) Total assets increased to **$8,139 million** at June 30, 2025, from **$7,502 million** at December 31, 2024, driven by higher current assets and liabilities **Total Assets (Period-end):** | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change | | :---------- | :----------------------- | :---------------------- | :----- | | Total assets | $8,139 | $7,502 | +$637 | **Total Liabilities (Period-end):** | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change | | :------------- | :----------------------- | :---------------------- | :----- | | Total liabilities | $6,680 | $5,917 | +$763 | **Key Balance Sheet Changes (June 30, 2025 vs. Dec 31, 2024):** | Item | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change | | :------------------------------------ | :----------------------- | :---------------------- | :----- | | Cash and cash equivalents | $486 | $494 | -$8 | | Accounts receivable (Trade) | $1,143 | $890 | +$253 | | Inventories | $1,105 | $1,047 | +$58 | | Short-term debt | $530 | $8 | +$522 | | Current portion of long-term debt | $22 | $214 | -$192 | | Accounts payable | $1,186 | $1,120 | +$66 | [Consolidated Statement of Cash Flows (Unaudited)](index=6&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows%20(Unaudited)) Net cash used in operating activities was **$5 million** for YTD 2025, a decrease from **$113 million provided** in the prior year, due to increased working capital usage **Cash Flow Summary (YTD YoY):** | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | Change | | :------------------------------------------ | :------------------ | :------------------ | :----- | | Net cash provided by (used in) operating activities | $(5) | $113 | -$118 | | Net cash used in investing activities | $(60) | $(177) | +$117 | | Net cash provided by (used in) financing activities | $1 | $(30) | +$31 | | Net decrease in cash, cash equivalents and restricted cash | $(64) | $(94) | +$30 | - Key Cash Flow Activities (YTD 2025): * Net change in short-term debt: **+$522 million** (vs. **-$4 million** in 2024) * Repayment of long-term debt: **-$210 million** (vs. **-$30 million** in 2024) * Repurchases of common stock: **-$257 million** (vs. **$0** in 2024) * Purchases of property, plant and equipment: **-$104 million** (vs. **-$161 million** in 2024) * Proceeds from sale of investments: **+$57 million** (vs. **$0** in 2024)[15](index=15&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) These notes detail Dana's accounting policies, Off-Highway business divestiture, restructuring, equity changes, financing, and segment reporting, including a new share repurchase program [Note 1. Organization and Summary of Significant Accounting Policies](index=8&type=section&id=Note%201.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) Dana reclassified its Off-Highway business as discontinued operations due to a June 2025 sale agreement and is evaluating new FASB ASUs on expense and income tax disclosures - Dana is a global provider of high-technology driveline, sealing and thermal-management products, and motors, power inverters, and control systems for electric vehicles[19](index=19&type=chunk) - In June 2025, Dana entered into a definitive agreement to sell its Off-Highway business, which has been classified as held for sale and reported as discontinued operations[22](index=22&type=chunk) - Dana is evaluating the impact of ASU 2024-03 (Disaggregation of Income Statement Expenses) and ASU 2023-09 (Improvements to Income Tax Disclosures), effective for fiscal years beginning after December 15, 2026, and December 15, 2024, respectively[24](index=24&type=chunk)[25](index=25&type=chunk) [Note 2. Discontinued Operations](index=8&type=section&id=Note%202.%20Discontinued%20Operations) Dana agreed to sell its Off-Highway business for **$2,732 million**, classifying it as discontinued operations, with net sales decreasing by **$63 million** in Q2 2025 - Dana agreed to sell its Off-Highway business to Allison Transmission Holdings, Inc. for **$2,732 million**, expected to close in Q4 2025[26](index=26&type=chunk) **Net Income from Discontinued Operations (Q2 YoY):** | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change | | :-------- | :----------------- | :----------------- | :----- | | Net sales | $663 | $726 | -$63 | | Net income | $43 | $77 | -$34 | **Net Income from Discontinued Operations (YTD YoY):** | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | Change | | :-------- | :------------------ | :------------------ | :----- | | Net sales | $1,263 | $1,484 | -$221 | | Net income | $90 | $142 | -$52 | - Incurred **$14 million** (Q2 2025) and **$34 million** (YTD 2025) in transaction-related costs for the Off-Highway business divestiture[28](index=28&type=chunk) **Assets and Liabilities of Discontinued Operations (June 30, 2025):** | Category | Amount (Millions) | | :---------------------------------- | :---------------- | | Current assets of disposal group held for sale | $1,090 | | Noncurrent assets of disposal group held for sale | $981 | | Current liabilities of disposal group held for sale | $753 | | Noncurrent liabilities of disposal group held for sale | $204 | [Note 3. Disposal Group Previously Held for Sale](index=10&type=section&id=Note%203.%20Disposal%20Group%20Previously%20Held%20for%20Sale) Dana's European hydraulics business was reclassified from held for sale to held and used after its sale was not completed, resulting in a **$26 million loss** in 2024 - European hydraulics business reclassified from "held for sale" to "held and used" as the sale was not completed[30](index=30&type=chunk) - A **$26 million loss** was recognized in 2024 to adjust the carrying value to fair value less costs to sell[30](index=30&type=chunk) [Note 4. Intangible Assets](index=12&type=section&id=Note%204.%20Intangible%20Assets) Net intangible assets totaled **$79 million** at June 30, 2025, with amortization expense remaining consistent at **$3 million** for Q2 2025 **Net Intangible Assets:** | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | | :---------------------- | :----------------------- | :---------------------- | | Net Carrying Amount | $79 | $80 | **Amortization Expense (Q2 YoY):** | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | | :----------------- | :----------------- | :----------------- | | Total amortization | $3 | $3 | **Amortization Expense (YTD YoY):** | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | | :----------------- | :------------------ | :------------------ | | Total amortization | $6 | $7 | [Note 5. Restructuring of Operations](index=13&type=section&id=Note%205.%20Restructuring%20of%20Operations) Dana continued restructuring activities in H1 2025, focusing on facility consolidation and headcount reductions, with accrued costs at **$38 million** as of June 30, 2025 - Restructuring activities include rationalizing operating footprint, consolidating facilities, positioning operations in lower cost locations, and headcount reduction initiatives[32](index=32&type=chunk) **Accrued Restructuring Costs (June 30, 2025):** | Metric | Amount (Millions) | | :-------------------------- | :---------------- | | Balance, June 30, 2025 | $38 | | Charges to restructuring (Q2) | $12 | | Cash payments (Q2) | $(10) | - Accrued employee termination benefits include costs to reduce approximately **700 employees** over the next year[34](index=34&type=chunk) [Note 6. Supplemental Balance Sheet and Cash Flow Information](index=13&type=section&id=Note%206.%20Supplemental%20Balance%20Sheet%20and%20Cash%20Flow%20Information) Supplier finance obligations increased to **$53 million**, inventories rose to **$1,105 million**, and total cash decreased to **$501 million** at June 30, 2025 - Confirmed obligations subject to supplier finance programs increased to **$53 million** at June 30, 2025, from **$46 million** at December 31, 2024[35](index=35&type=chunk) **Inventory Components (June 30, 2025 vs. Dec 31, 2024):** | Component | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | | :------------------------ | :----------------------- | :---------------------- | | Raw materials | $489 | $456 | | Work in process and finished goods | $616 | $591 | | Total | $1,105 | $1,047 | **Cash, Cash Equivalents and Restricted Cash (June 30, 2025 vs. Dec 31, 2024):** | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | | :------------------------------------ | :----------------------- | :---------------------- | | Cash and cash equivalents | $486 | $494 | | Total cash, cash equivalents and restricted cash | $501 | $512 | [Note 7. Stockholders' Equity](index=14&type=section&id=Note%207.%20Stockholders%27%20Equity) Dana declared a **$0.10** cash dividend and repurchased **$257 million** of common stock under a **$1,000 million** program, leading to a decrease in stockholders' equity - Declared a cash dividend of ten cents per share of common stock in the first and second quarters of 2025[37](index=37&type=chunk) - Board of Directors approved a stock repurchase program of up to an aggregate of **$1,000 million** through December 31, 2027[38](index=38&type=chunk) - Spent **$257 million** to repurchase **14,607,283 shares** of common stock during Q2 2025, including **$251 million** from the Icahn Group. Approximately **$743 million** remained available[38](index=38&type=chunk)[194](index=194&type=chunk) **Total Parent Company Stockholders' Equity:** | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change | | :-------------------------------- | :----------------------- | :---------------------- | :----- | | Total parent company stockholders' equity | $1,204 | $1,333 | -$129 | - Accumulated other comprehensive loss (AOCI) improved from **$(1,142) million** at December 31, 2024, to **$(1,047) million** at June 30, 2025, driven by positive currency translation adjustments and hedging gains[13](index=13&type=chunk)[42](index=42&type=chunk) [Note 8. Redeemable Noncontrolling Interests](index=17&type=section&id=Note%208.%20Redeemable%20Noncontrolling%20Interests) Hydro-Québec holds a **45%** redeemable noncontrolling interest in Dana TM4 Inc., with the balance remaining at **$189 million** at June 30, 2025 - Hydro-Québec owns a **45%** redeemable noncontrolling interest in Dana TM4 Inc., Dana TM4 Electric Holdings BV and Dana TM4 USA, LLC, with a put right at fair value[44](index=44&type=chunk) - On May 6, 2024, Hydro-Québec provided Dana with its put notice, after which Dana no longer attributes net income (loss) and other comprehensive income (loss) items of these entities to Hydro-Québec's interest[45](index=45&type=chunk) - The balance of redeemable noncontrolling interests was **$189 million** at June 30, 2025, unchanged from December 31, 2024[13](index=13&type=chunk)[46](index=46&type=chunk) [Note 9. Earnings per Share](index=17&type=section&id=Note%209.%20Earnings%20per%20Share) Basic and diluted EPS for Q2 2025 increased to **$0.19** from **$0.11** in Q2 2024, driven by higher net income attributable to the parent company **Basic and Diluted EPS (Q2 YoY):** | Metric | Q2 2025 | Q2 2024 | Change | | :------------------------------------ | :------ | :------ | :----- | | Basic earnings per share | $0.19 | $0.11 | +$0.08 | | Diluted earnings per share | $0.19 | $0.11 | +$0.08 | **Basic and Diluted EPS (YTD YoY):** | Metric | YTD 2025 | YTD 2024 | Change | | :------------------------------------ | :------- | :------- | :----- | | Basic earnings per share | $0.36 | $0.13 | +$0.23 | | Diluted earnings per share | $0.36 | $0.13 | +$0.23 | **Weighted-Average Common Shares Outstanding (Q2 YoY):** | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change | | :------------------------------------ | :----------------- | :----------------- | :----- | | Basic | 143.8 | 145.0 | -1.2 | | Diluted | 143.8 | 145.0 | -1.2 | [Note 10. Stock Compensation](index=18&type=section&id=Note%2010.%20Stock%20Compensation) Dana granted **0.9 million RSUs** and **0.4 million PSUs** in H1 2025, with stock compensation expense increasing to **$11 million** in Q2 2025 - Granted **0.9 million RSUs** (Fair Value **$16.33/share**) and **0.4 million PSUs** (Fair Value **$18.70/share**) during the six months ended June 30, 2025[49](index=49&type=chunk) **Stock Compensation Expense (Q2 YoY):** | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change | | :-------------------------- | :----------------- | :----------------- | :----- | | Stock compensation expense | $11 | $8 | +$3 | **Stock Compensation Expense (YTD YoY):** | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | Change | | :-------------------------- | :------------------ | :------------------ | :----- | | Stock compensation expense | $23 | $14 | +$9 | - Total unrecognized compensation cost related to nonvested awards was **$32 million** at June 30, 2025, expected to be recognized over a weighted-average period of **1.5 years**[50](index=50&type=chunk) [Note 11. Pension and Postretirement Benefit Plans](index=18&type=section&id=Note%2011.%20Pension%20and%20Postretirement%20Benefit%20Plans) Net periodic pension benefit cost was **$4 million** in Q2 2025, while OPEB costs were a **$1 million credit**, with service costs in cost of sales and SG&A **Net Periodic Benefit Cost (Pension - Q2 YoY):** | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change | | :-------------------------- | :----------------- | :----------------- | :----- | | U.S. Pension | $1 | $0 | +$1 | | Non-U.S. Pension | $3 | $5 | -$2 | | Total Pension | $4 | $5 | -$1 | **Net Periodic Benefit Cost (Pension - YTD YoY):** | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | Change | | :-------------------------- | :------------------ | :------------------ | :----- | | U.S. Pension | $1 | $1 | $0 | | Non-U.S. Pension | $6 | $8 | -$2 | | Total Pension | $7 | $9 | -$2 | **Net Periodic Benefit Cost (OPEB - Q2 YoY):** | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change | | :-------------------------- | :----------------- | :----------------- | :----- | | Non-U.S. OPEB | $(1) | $0 | -$1 | **Net Periodic Benefit Cost (OPEB - YTD YoY):** | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | Change | | :-------------------------- | :------------------ | :------------------ | :----- | | Non-U.S. OPEB | $(1) | $0 | -$1 | [Note 12. Financing Agreements](index=19&type=section&id=Note%2012.%20Financing%20Agreements) Long-term debt increased to **$2,568 million** at June 30, 2025, with Dana retiring April 2025 Senior Notes and establishing a **$250 million** Term A Facility, while remaining compliant with debt covenants **Long-Term Debt (June 30, 2025 vs. Dec 31, 2024):** | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change | | :------------------------------------ | :----------------------- | :---------------------- | :----- | | Long-term debt, less debt issuance costs | $2,568 | $2,387 | +$181 | - Retired its remaining April 2025 Senior Notes on April 15, 2025[57](index=57&type=chunk) - On July 31, 2025, amended its credit and guaranty agreement to include a **$250 million** Term A Facility, which was fully drawn to pay down outstanding borrowings on the Revolving Facility[60](index=60&type=chunk) - Had availability of **$615 million** at June 30, 2025, under the Revolving Facility[63](index=63&type=chunk) - In compliance with the covenants of its financing agreements at June 30, 2025, including a first lien net leverage ratio not to exceed **2.00 to 1.00**[64](index=64&type=chunk) [Note 13. Fair Value Measurements and Derivatives](index=21&type=section&id=Note%2013.%20Fair%20Value%20Measurements%20and%20Derivatives) Dana uses derivatives to manage foreign currency exposure, with **$1,156 million** in forward contracts and **$715 million** in currency swaps, reporting a **$15 million** deferred gain in AOCI **Fair Value of Financial Instruments (June 30, 2025):** | Instrument | Fair Value (Millions) | Carrying Value (Millions) | | :--------------- | :-------------------- | :------------------------ | | Long-term debt | $2,471 | $2,420 | **Foreign Currency Derivatives Notional Amounts (June 30, 2025 vs. Dec 31, 2024):** | Derivative Type | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | | :------------------------------ | :----------------------- | :---------------------- | | Foreign currency forward contracts | $1,156 | $1,147 | | Foreign currency swaps | $715 | $951 | **Deferred Gain (Loss) in AOCI from Cash Flow Hedges (June 30, 2025 vs. Dec 31, 2024):** | Derivative Type | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | | :-------------------- | :----------------------- | :---------------------- | | Forward Contracts | $16 | $(35) | | Cross-Currency Swaps | $(1) | $(3) | | Total | $15 | $(38) | - **$16 million** from forward contracts expected to be reclassified to income in one year or less[73](index=73&type=chunk) [Note 14. Commitments and Contingencies](index=27&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) Accrued environmental liabilities were **$14 million** at June 30, 2025, and Dana believes legal proceedings will not materially impact its financial condition - Accrued environmental liabilities were **$14 million** at June 30, 2025, compared to **$13 million** at December 31, 2024[77](index=77&type=chunk) - Dana is subject to various pending or threatened legal proceedings but believes any liabilities will not have a material adverse effect on its liquidity, financial condition, or results of operations[78](index=78&type=chunk) [Note 15. Warranty Obligations](index=27&type=section&id=Note%2015.%20Warranty%20Obligations) Warranty liabilities were **$84 million** at June 30, 2025, with accruals for current period sales at **$9 million** in Q2 2025 **Warranty Liabilities (June 30, 2025 vs. June 30, 2024):** | Metric | June 30, 2025 (Millions) | June 30, 2024 (Millions) | | :-------------------- | :----------------------- | :----------------------- | | Balance, end of period | $84 | $86 | **Accruals for Current Period Sales (Q2 YoY):** | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | | :-------------------------- | :----------------- | :----------------- | | Accrued for current period sales | $9 | $8 | **Accruals for Current Period Sales (YTD YoY):** | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | | :-------------------------- | :------------------ | :------------------ | | Accrued for current period sales | $18 | $16 | [Note 16. Income Taxes](index=27&type=section&id=Note%2016.%20Income%20Taxes) Income tax expense was **$10 million** in Q2 2025, with effective tax rates of **(43)%** for Q2 and **0%** for YTD 2025, influenced by a **$19 million** tax benefit **Income Tax Expense (Q2 YoY):** | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change | | :----------------- | :----------------- | :----------------- | :----- | | Income tax expense | $10 | $12 | -$2 | **Income Tax Expense (YTD YoY):** | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | Change | | :----------------- | :------------------ | :------------------ | :----- | | Income tax expense | $0 | $5 | -$5 | **Effective Tax Rates (YTD YoY):** | Metric | YTD 2025 | YTD 2024 | | :------------------ | :------- | :------- | | Effective tax rate | 0% | (4)% | - Significant Tax Adjustments (YTD 2025): * Tax benefit of **$19 million** due to a basis difference in a foreign subsidiary * **$9 million** tax expense for income tax reserves associated with prior tax years in foreign jurisdictions * **$6 million** expense resulting from the sale of Dana's ownership interest in an equity method investment[84](index=84&type=chunk) - The company is currently assessing the impact of the newly enacted One Big Beautiful Bill Act (OBBBA) in the U.S. on its consolidated financial

Part I Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Ingredion Incorporated for the three and six months ended June 30, 2025, and 2024, including income, comprehensive income, balance sheets, equity changes, and cash flows, with accompanying notes [Condensed Consolidated Statements of Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q2 2025 net sales decreased to $1,833 million, while net income attributable to Ingredion increased to $196 million, with year-to-date net income growing to $393 million from higher operating income Consolidated Income Statement Highlights (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $1,833 | $1,878 | $3,646 | $3,760 | | **Gross Profit** | $477 | $446 | $943 | $863 | | **Operating Income** | $271 | $240 | $547 | $453 | | **Net Income Attributable to Ingredion** | $196 | $148 | $393 | $364 | | **Diluted EPS** | $2.99 | $2.22 | $5.99 | $5.46 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to $7,781 million, primarily due to higher accounts receivable, while total liabilities slightly decreased and stockholders' equity grew to $4,197 million Balance Sheet Summary (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $3,517 | $3,355 | | **Total Assets** | $7,781 | $7,444 | | **Total Current Liabilities** | $1,264 | $1,281 | | **Total Liabilities** | $3,505 | $3,554 | | **Total Ingredion Stockholders' Equity** | $4,197 | $3,804 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash provided by operating activities for the six months ended June 30, 2025, decreased to $262 million due to working capital changes, with $215 million used for investing and $204 million for financing activities Cash Flow Summary - Six Months Ended June 30 (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Cash provided by operating activities** | $262 | $521 | | **Cash (used for) provided by investing activities** | $(215) | $125 | | **Cash used for financing activities** | $(204) | $(526) | | **(Decrease) increase in cash and cash equivalents** | $(136) | $104 | [Notes to the Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, divestitures, investments, and segment performance, highlighting the South Korea business sale, a new joint venture with Agrana, and ongoing share repurchases - On February 1, 2024, the company completed the sale of its South Korea business for approximately **$294 million**, recognizing a pre-tax net gain of **$82 million**[25](index=25&type=chunk) - In June 2025, the company entered into a joint venture with Agrana Stärke GmbH, acquiring a **49%** equity interest for **$19 million** to develop starch production in Romania[26](index=26&type=chunk) - Year-to-date 2025, the company repurchased **409,000** shares of common stock for **$55 million**. As of June 30, 2025, **2.9 million** shares remained available for repurchase under the current program[47](index=47&type=chunk) Segment Net Sales to Unaffiliated Customers - YTD 2025 vs 2024 (in millions) | Segment | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | T&HS | $1,201 | $1,185 | | F&II - LATAM | $1,169 | $1,246 | | F&II - U.S./Canada | $1,043 | $1,096 | | All Other | $233 | $233 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 and YTD 2025 financial results, noting increased net income driven by higher operating income as input costs declined faster than net sales, covering segment performance, liquidity, and cash flow activities - Year-to-date 2025 net income attributable to Ingredion increased to **$393 million** from **$364 million** in 2024, primarily due to a **21%** increase in operating income, driven by corn and input costs declining faster than net sales[81](index=81&type=chunk) - The company maintains a strong liquidity position with **$3.7 billion** available as of June 30, 2025, comprising cash, short-term investments, and borrowing capacity[117](index=117&type=chunk) - Capital investment commitments for the full year 2025 are anticipated to be between **$400 million** and **$425 million**[123](index=123&type=chunk) [Results of Operations - Second Quarter 2025](index=29&type=section&id=Results%20of%20Operations%20-%20Second%20Quarter%202025) Q2 2025 net sales decreased 2% to $1,833 million, while gross profit margin improved to 26% as cost of sales fell 5%, leading to a 32% increase in net income attributable to Ingredion, reaching $196 million Q2 2025 vs Q2 2024 Performance (in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,833 | $1,878 | -2% | | Cost of Sales | $1,356 | $1,432 | -5% | | Operating Income | $271 | $240 | +13% | | Net Income Attributable to Ingredion | $196 | $148 | +32% | - The effective tax rate decreased to **23.6%** in Q2 2025 from **34.8%** in Q2 2024, primarily due to the changing value of the Mexican peso and the tax impact of a 2024 impairment charge[92](index=92&type=chunk) [Segment Results - Second Quarter 2025](index=30&type=section&id=Segment%20Results%20-%20Second%20Quarter%202025) In Q2 2025, T&HS adjusted operating income increased 29%, F&II - LATAM decreased 2%, F&II - U.S./Canada fell 18%, and the All Other segment significantly reduced its operating loss Q2 2025 Adjusted Operating Income by Segment (in millions) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Texture & Healthful Solutions | $111 | $86 | +29% | | Food & Industrial Ingredients - LATAM | $127 | $130 | -2% | | Food & Industrial Ingredients - U.S./Canada | $86 | $105 | -18% | | All Other | $(1) | $(10) | +90% | [Results of Operations - Year-to-Date 2025](index=31&type=section&id=Results%20of%20Operations%20-%20Year-to-Date%202025) For YTD 2025, net sales decreased 3% to $3,646 million, but a 7% drop in cost of sales improved gross profit margin to 26% and increasing operating income by 21% to $547 million, with net income attributable to Ingredion rising to $393 million - Excluding the impact of the South Korea business sale in 2024, net sales decreased **2%** year-over-year[102](index=102&type=chunk) - Gross profit margin increased to **26%** for YTD 2025 from **23%** in YTD 2024, as raw material and input costs decreased faster than sales[103](index=103&type=chunk) - Financing costs decreased **28%** to **$21 million** due to lower average debt balances[107](index=107&type=chunk) [Liquidity and Cash](index=32&type=section&id=Liquidity%20and%20Cash) As of June 30, 2025, Ingredion had $3.7 billion in liquidity and $1.8 billion in debt, with cash from operations decreasing to $262 million due to working capital changes and cash used for capital expenditures, financing, dividends, and share repurchases Liquidity Position as of June 30, 2025 (in billions) | Component | Amount | | :--- | :--- | | Total Available Liquidity | $3.7 | | Total Debt Outstanding | $1.8 | - Cash from operating activities decreased to **$262 million** YTD 2025 from **$521 million** YTD 2024, primarily due to a **$250 million** change in working capital from increased trade accounts receivables[122](index=122&type=chunk) - The quarterly dividend was increased to **$0.80 per share** in 2025 from **$0.78 per share** in 2024[125](index=125&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes in the company's market risk exposures, including interest rates, raw material and energy costs, and foreign currencies, during the first six months of 2025 compared to the information provided in the 2024 Annual Report on Form 10-K - There have been no material changes in the information provided with respect to market risks during year-to-date 2025[137](index=137&type=chunk) [Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2025, the company's disclosure controls and procedures are effective[138](index=138&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[139](index=139&type=chunk) Part II Other Information [Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material developments in environmental proceedings related to its Bedford Park, Illinois facility and does not anticipate material adverse effects from other ordinary course claims - There have been no material developments in the environmental proceedings related to the Bedford Park, Illinois manufacturing facility as of the date of this report[140](index=140&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No common stock shares were repurchased during Q2 2025, with 2.9 million shares remaining available under the existing repurchase program authorized through December 31, 2025 - No shares of common stock were repurchased during the second quarter of 2025[142](index=142&type=chunk) - As of June 30, 2025, **2.9 million** shares were available for repurchase under the stock repurchase program authorized until December 31, 2025[142](index=142&type=chunk) [Other Information](index=30&type=section&id=Item%205.%20Other%20Information) On May 7, 2025, CEO James P. Zallie and SVP Larry Fernandes entered into Rule 10b5-1 plans for common stock sales, commencing August 6, 2025 - CEO James P. Zallie entered into a Rule 10b5-1 plan to sell up to **195,155** shares of common stock, commencing August 6, 2025[143](index=143&type=chunk) - SVP Larry Fernandes entered into a Rule 10b5-1 plan to sell up to **13,161** shares of common stock, commencing August 6, 2025[144](index=144&type=chunk) [Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and various XBRL data files - The exhibits filed with the report include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, as well as XBRL data files[145](index=145&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38483 BAYCOM CORP (Exact name of registrant as specified in its charter) California 37-1849111 (State or other jurisdicti ...

PART I—FINANCIAL INFORMATION This section presents unaudited condensed consolidated financial statements and detailed notes for Mistras Group, Inc. [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of Mistras Group, Inc. and its subsidiaries for the periods ended June 30, 2025, and December 31, 2024 (for balance sheet) or June 30, 2024 (for income, comprehensive income, equity, and cash flow statements) [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) This section presents key balance sheet data, highlighting changes in total assets, liabilities, and equity between December 31, 2024, and June 30, 2025 Key Balance Sheet Data (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total current assets | $213,307 | $172,470 | | Total assets | $571,043 | $523,038 | | Total current liabilities | $128,494 | $114,925 | | Total liabilities | $354,868 | $324,143 | | Total equity | $216,175 | $198,895 | - Total assets increased by **$48.0 million** (**9.2%**) from December 31, 2024, to June 30, 2025, primarily driven by increases in accounts receivable, net, and property, plant and equipment, net[12](index=12&type=chunk) - Total liabilities increased by **$30.7 million** (**9.5%**) over the same period, mainly due to higher long-term debt and accounts payable[12](index=12&type=chunk) [Unaudited Condensed Consolidated Statements of Income (Loss)](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) This section provides key income statement data, detailing revenue, gross profit, operating income, and net income trends for the three and six months ended June 30, 2025, compared to prior year periods Key Income Statement Data (in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $185,405 | $189,773 | $347,020 | $374,215 | | Gross profit | $53,945 | $51,340 | $94,837 | $97,492 | | Income from operations | $8,428 | $11,959 | $7,416 | $17,511 | | Net income (loss) attributable to Mistras Group, Inc. | $3,017 | $6,369 | $(169) | $7,364 | | Basic EPS | $0.10 | $0.21 | $0.00 | $0.24 | | Diluted EPS | $0.10 | $0.20 | $0.00 | $0.23 | - Revenue decreased by **2.3%** for the three months ended June 30, 2025, and by **7.3%** for the six months ended June 30, 2025, compared to the prior year periods[14](index=14&type=chunk) - Net income attributable to Mistras Group, Inc. decreased significantly for both the three-month (**52.7%**) and six-month periods (from profit to loss) ended June 30, 2025, compared to the prior year[14](index=14&type=chunk) [Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section presents comprehensive income data, highlighting the significant increase in comprehensive income attributable to Mistras Group, Inc. due to favorable foreign currency translation adjustments Key Comprehensive Income Data (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $3,126 | $6,373 | $(42) | $7,377 | | Foreign currency translation adjustments | $11,739 | $(1,616) | $14,212 | $(5,845) | | Comprehensive income | $14,865 | $4,757 | $14,170 | $1,532 | | Comprehensive income attributable to Mistras Group, Inc. | $14,874 | $4,753 | $14,170 | $1,519 | - Comprehensive income attributable to Mistras Group, Inc. significantly increased for both the three-month (**213%**) and six-month (**833%**) periods ended June 30, 2025, primarily due to favorable foreign currency translation adjustments[16](index=16&type=chunk) [Unaudited Condensed Consolidated Statements of Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Equity) This section details changes in total equity, which increased by $17.28 million from December 31, 2024, to June 30, 2025, driven by share-based payments and other comprehensive income Key Equity Data (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total Mistras Group, Inc. stockholders' equity | $215,848 | $198,568 | | Total Equity | $216,175 | $198,895 | - Total equity increased by **$17.28 million** (**8.7%**) from December 31, 2024, to June 30, 2025, driven by share-based payments and other comprehensive income (loss), net of tax, despite a net loss for the six-month period[19](index=19&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents key cash flow data, showing a shift from cash provided by operating activities in H1 2024 to cash used in H1 2025, while financing activities provided more cash due to increased debt borrowings Key Cash Flow Data (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(3,619) | $5,115 | | Net cash used in investing activities | $(11,416) | $(11,217) | | Net cash provided by financing activities | $14,910 | $5,261 | | Net change in cash and cash equivalents | $1,640 | $(469) | | Cash and cash equivalents at end of period | $19,957 | $17,177 | - Operating activities shifted from providing **$5.1 million** cash in H1 2024 to using **$3.6 million** cash in H1 2025, a decrease of **$8.7 million**[21](index=21&type=chunk) - Financing activities provided significantly more cash in H1 2025 (**$14.9 million**) compared to H1 2024 (**$5.3 million**), primarily due to increased net debt borrowings[21](index=21&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the company's business, accounting policies, revenue recognition, share-based compensation, and other financial details [1. Description of Business and Basis of Presentation](index=9&type=section&id=1.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) Mistras Group, Inc. is a multinational provider of integrated technology-enabled asset protection solutions across various industries, operating through three segments, with a recent reclassification of certain costs impacting gross profit - Mistras Group, Inc. is a leading multinational provider of integrated technology-enabled asset protection solutions, serving industries like oil and gas, aerospace, industrials, and power generation[24](index=24&type=chunk)[25](index=25&type=chunk) - The company's operations are divided into three segments: North America, International, and Products and Systems[30](index=30&type=chunk) - Effective January 1, 2025, the company reclassified certain overhead and personnel costs from Selling, general and administrative expenses to Cost of revenue, retrospectively applied, impacting Gross profit but not net income or EPS[35](index=35&type=chunk)[36](index=36&type=chunk) Impact of Reclassification on 2024 Financials (in thousands) | Metric | As Previously Reported (3M ended June 30, 2024) | Effect of change | As Adjusted (3M ended June 30, 2024) | | :--------------------------------------- | :---------------------------------------------- | :--------------- | :----------------------------------- | | Cost of revenue | $127,760 | $4,776 | $132,536 | | Gross profit | $56,116 | $(4,776) | $51,340 | | Selling, general and administrative expenses | $40,957 | $(4,776) | $36,181 | | Metric | As Previously Reported (6M ended June 30, 2024) | Effect of change | As Adjusted (6M ended June 30, 2024) | | :--------------------------------------- | :---------------------------------------------- | :--------------- | :----------------------------------- | | Cost of revenue | $255,179 | $9,713 | $264,892 | | Gross profit | $107,205 | $(9,713) | $97,492 | | Selling, general and administrative expenses | $82,144 | $(9,713) | $72,431 | - The effective income tax rate for the three months ended June 30, 2025, was **25.4%** (vs. **15.5%** in 2024), and for the six months ended June 30, 2025, was **71.4%** (vs. **14.9%** in 2024), with fluctuations attributed to discrete items related to stock compensation and valuation allowance reversals[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) - The company is evaluating the impact of the recently enacted H.R.1, the One Big Beautiful Bill Act (OBBBA), which includes broad tax reform provisions[46](index=46&type=chunk) [2. Revenue](index=13&type=section&id=2.%20Revenue) The company primarily recognizes revenue from integrated inspection services over time, with total revenue decreasing by 2.3% for the three months and 7.3% for the six months ended June 30, 2025, driven by declines in North America - The majority of revenue is derived from providing integrated and bundled inspection services, recognized over time based on time and material incurred[53](index=53&type=chunk)[55](index=55&type=chunk) Revenue by Segment (in thousands) | Segment | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $147,992 | $156,394 | $276,894 | $306,743 | | International | $39,077 | $34,264 | $72,291 | $67,311 | | Products and Systems | $2,740 | $3,373 | $5,831 | $6,583 | | Total | $185,405 | $189,773 | $347,020 | $374,215 | - Total revenue decreased by **2.3%** for the three months ended June 30, 2025, and by **7.3%** for the six months ended June 30, 2025, compared to the prior year periods[147](index=147&type=chunk)[151](index=151&type=chunk) - North America segment revenue decreased by **5.4%** (three months) and **9.7%** (six months) due to declines in Oil and Gas and other key markets. International segment revenue increased by **14.0%** (three months) and **7.4%** (six months) due to organic growth and favorable foreign exchange rates[149](index=149&type=chunk)[151](index=151&type=chunk) Revenue by Industry (in thousands) - Three Months Ended June 30 | Industry | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Oil & Gas | $102,816 | $109,256 | | Aerospace & Defense | $24,002 | $22,340 | | Industrials | $19,604 | $18,294 | | Power Generation & Transmission | $11,793 | $9,033 | | Other Process Industries | $11,049 | $14,909 | | Infrastructure, Research & Engineering | $8,060 | $8,633 | | Petrochemical | $3,113 | $4,019 | | Other | $4,968 | $3,289 | - Oil and Gas customer revenue comprised approximately **55%** of total revenue for the three months ended June 30, 2025, and **57%** for the six months ended June 30, 2025, showing a slight decrease in its proportion compared to prior year[150](index=150&type=chunk)[152](index=152&type=chunk) - Field Services revenue decreased by **$11.0 million** (three months) and **$27.2 million** (six months) due to decreased sales volume in oil and gas, industrials, and infrastructure markets[158](index=158&type=chunk) - Shop Laboratory revenue decreased by **$1.3 million** (three months) and **$3.4 million** (six months) due to decreased sales volumes in the aerospace and defense market[159](index=159&type=chunk) [3. Share-Based Compensation](index=16&type=section&id=3.%20Share-Based%20Compensation) The company grants various share-based incentive awards under its 2016 Long-Term Incentive Plan, recognizing compensation expense for stock options, RSUs, and PRSUs, with significant unrecognized costs remaining - The 2016 Long-Term Incentive Plan was amended to increase authorized shares by **1.3 million**, totaling **6.2 million** shares, with approximately **823,000** shares available for future grants as of June 30, 2025[68](index=68&type=chunk) - **375,000** stock options were granted to Mr. Stamatakis on January 6, 2025, with an exercise price of **$9.06**, vesting on the first anniversary of the grant date[69](index=69&type=chunk)[70](index=70&type=chunk) - The company recognized **$1.0 million** in share-based compensation expense for stock options during the six months ended June 30, 2025, with **$1.0 million** remaining unrecognized[70](index=70&type=chunk) Stock Issuances to Non-Employee Directors (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Awards issued (shares) | 72 | 31 | | Grant date fair value of awards issued | $571 | $274 | - Share-based compensation expense for restricted stock units (RSUs) was **$0.9 million** (three months) and **$2.1 million** (six months) for 2025, with **$7.1 million** of unrecognized costs remaining[72](index=72&type=chunk) - Performance Restricted Stock Units (PRSUs) were granted to executives with payout varying based on Free Cash Flow, Adjusted EBITDA, and Revenue performance metrics, with revised goals for 2025 awards[75](index=75&type=chunk)[77](index=77&type=chunk)[79](index=79&type=chunk) - Unrecognized compensation costs for PRSUs totaled **$3.9 million** as of June 30, 2025, expected to be recognized over **2.9 years**[80](index=80&type=chunk) [4. Earnings (loss) per Share](index=19&type=section&id=4.%20Earnings%20(loss)%20per%20Share) Basic and diluted earnings per share for the three months ended June 30, 2025, were $0.10, a decrease from the prior year, while for the six months, both were $0.00 due to a net loss Earnings (Loss) Per Share (in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to Mistras Group, Inc. | $3,017 | $6,369 | $(169) | $7,364 | | Basic earnings (loss) per share | $0.10 | $0.21 | $0.00 | $0.24 | | Diluted earnings (loss) per share | $0.10 | $0.20 | $0.00 | $0.23 | - For the three months ended June 30, 2025, **375,000** stock options and **877,000** restricted stock units were anti-dilutive and excluded from diluted EPS calculation[82](index=82&type=chunk) - For the six months ended June 30, 2025, **106,000** stock options and **867,000** restricted stock units were excluded from diluted EPS calculation due to the net loss for the period[82](index=82&type=chunk) [5. Accounts Receivable, net](index=20&type=section&id=5.%20Accounts%20Receivable,%20net) Accounts receivable, net, increased to $159.8 million as of June 30, 2025, from $127.3 million at December 31, 2024, including a significant rise in unbilled revenue Accounts Receivable, net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Trade accounts receivable | $162,727 | $129,894 | | Allowance for credit losses | $(2,904) | $(2,613) | | Accounts receivable, net | $159,823 | $127,281 | - Unbilled revenue accrued was **$41.0 million** as of June 30, 2025, an increase from **$21.3 million** at December 31, 2024, and is generally billed within **90 days**[83](index=83&type=chunk) [6. Inventories](index=21&type=section&id=6.%20Inventories) Total inventories increased to $15.1 million as of June 30, 2025, from $14.5 million at December 31, 2024, primarily due to an increase in raw materials and consumable supplies Inventories (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Raw materials and consumable supplies | $9,771 | $8,321 | | Work in progress | $1,036 | $1,018 | | Finished goods | $4,311 | $5,146 | | Inventories | $15,118 | $14,485 | [7. Property, Plant and Equipment, net](index=21&type=section&id=7.%20Property,%20Plant%20and%20Equipment,%20net) Property, plant and equipment, net, increased to $85.9 million as of June 30, 2025, from $80.9 million at December 31, 2024, mainly due to an increase in machinery and equipment, while depreciation expense decreased Property, Plant and Equipment, net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Machinery and equipment | $302,803 | $274,907 | | Total gross amount | $344,810 | $322,077 | | Accumulated depreciation and amortization | $(258,901) | $(241,185) | | Property, plant and equipment, net | $85,909 | $80,892 | - Depreciation expense was approximately **$6.1 million** for the three months ended June 30, 2025 (vs. **$6.4 million** in 2024) and **$12.1 million** for the six months ended June 30, 2025 (vs. **$12.8 million** in 2024)[87](index=87&type=chunk)[88](index=88&type=chunk) [8. Goodwill](index=21&type=section&id=8.%20Goodwill) Goodwill increased to $185.1 million as of June 30, 2025, primarily due to foreign currency translation adjustments, with no impairment identified Goodwill by Segment (in thousands) | Segment | December 31, 2024 | Foreign currency translation | June 30, 2025 | | :---------------- | :---------------- | :--------------------------- | :------------ | | North America | $181,442 | $3,683 | $185,125 | | Total | $181,442 | $3,683 | $185,125 | - The company reviews goodwill for impairment annually on October 1 and did not identify any changes in circumstances indicating impairment through June 30, 2025[89](index=89&type=chunk)[90](index=90&type=chunk) [9. Intangible Assets](index=22&type=section&id=9.%20Intangible%20Assets) Net intangible assets remained stable at $39.6 million as of June 30, 2025, with customer relationships and software/technology as major components, and amortization expense decreasing Intangible Assets, Net (in thousands) | Type | June 30, 2025 Net Carrying Amount | December 31, 2024 Net Carrying Amount | | :-------------------- | :-------------------------------- | :------------------------------------ | | Customer relationships | $14,114 | $15,484 | | Software/Technology | $25,110 | $23,484 | | Covenants not to compete | $10 | $20 | | Other | $337 | $720 | | Total | $39,571 | $39,708 | - Amortization expense was approximately **$1.6 million** for the three months ended June 30, 2025 (vs. **$1.9 million** in 2024) and **$3.4 million** for the six months ended June 30, 2025 (vs. **$3.9 million** in 2024)[92](index=92&type=chunk)[93](index=93&type=chunk) [10. Accrued Expenses and Other Current Liabilities](index=22&type=section&id=10.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Accrued expenses and other current liabilities increased to $90.5 million as of June 30, 2025, primarily due to higher accrued salaries, wages, and deferred revenue Accrued Expenses and Other Current Liabilities (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Accrued salaries, wages and related employee benefits | $30,820 | $27,990 | | Deferred revenue | $9,811 | $8,096 | | Other accrued expenses | $32,586 | $30,416 | | Total | $90,482 | $85,233 | [11. Long-Term Debt](index=22&type=section&id=11.%20Long-Term%20Debt) Total debt increased to $189.4 million as of June 30, 2025, due to increased borrowings under the senior credit facility, with the company remaining in compliance with all covenants Long-Term Debt (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Senior credit facility | $84,250 | $59,650 | | Senior secured term loan, net | $102,909 | $107,545 | | Total debt | $189,414 | $169,647 | | Long-term debt, net of current portion | $176,345 | $158,056 | - The company has a **$190 million** 5-year committed revolving credit facility and a **$125 million** term loan, both maturing on July 30, 2027[97](index=97&type=chunk) - As of June 30, 2025, borrowings under the Credit Agreement totaled **$187.2 million**, with **$3.1 million** in letters of credit outstanding[98](index=98&type=chunk) - The company was in compliance with all terms and covenants of the Credit Agreement as of June 30, 2025, including maintaining a Total Consolidated Debt Leverage Ratio of no more than **3.75 to 1.0** and a Fixed Charge Coverage Ratio of **1.25 to 1.0**[99](index=99&type=chunk)[100](index=100&type=chunk) [12. Fair Value Measurements](index=24&type=section&id=12.%20Fair%20Value%20Measurements) The company determined that the carrying value of its long-term debt, notes payable, and finance lease obligations approximates their fair value - The carrying value of the company's long-term debt, notes payable, and finance lease obligations approximates their fair value[104](index=104&type=chunk) [13. Commitments and Contingencies](index=24&type=section&id=13.%20Commitments%20and%20Contingencies) The company is involved in various legal proceedings and government investigations, including an environmental lawsuit in Arizona and a potential multi-employer pension fund withdrawal liability - The company is subject to a lawsuit by the State of Arizona and the Arizona Department of Environmental Quality (DEQ) alleging environmental violations at its Phoenix testing facility[106](index=106&type=chunk) - The Superior Court declined a preliminary injunction but imposed conditions, including prohibiting chromic acid release, requiring facility improvements, and restricting chrome plating operations until improvements are completed and DEQ notified[107](index=107&type=chunk) - Mistras Arizona notified the DEQ of completed improvements in April 2025 and recommenced chrome plating operations on April 28, 2025[107](index=107&type=chunk) - The company is unable to estimate the range of loss for remediation costs, fines, and penalties related to the Arizona lawsuit[109](index=109&type=chunk) - Mistras Arizona was identified as a potentially responsible party by the EPA for the Motorola 52nd Street Superfund Site[110](index=110&type=chunk) - The company has an estimated **$2.5 million** potential withdrawal liability to a multi-employer pension fund[112](index=112&type=chunk) [14. Segment Disclosure](index=25&type=section&id=14.%20Segment%20Disclosure) The company's three reportable segments are North America, International, and Products and Systems, with segment income (loss) from operations as the primary performance measure for resource allocation - The company's three reportable segments are North America, International, and Products and Systems, based on customer type, service requirements, distribution methods, and major product lines[115](index=115&type=chunk) - Natalia Shuman, as CEO, is the Chief Operating Decision Maker (CODM) responsible for reviewing financial information at the operating segment level to allocate resources and assess performance[114](index=114&type=chunk) - Segment income (loss) from operations is the primary performance measure used by the CODM, which includes revenue, SG&A, and 'other expenses' (cost of revenue, bad debt, impairment, reorganization, environmental, legal settlements, D&A, R&E)[116](index=116&type=chunk) Income (Loss) from Operations by Segment (in thousands) - Three Months Ended June 30 | Segment | 2025 | 2024 | | :------------------- | :----- | :----- | | North America | $16,758 | $18,727 | | International | $4,004 | $1,647 | | Products and Systems | $336 | $495 | | Corporate and eliminations | $(12,670) | $(8,910) | | Total | $8,428 | $11,959 | Total Assets by Segment (in thousands) | Segment | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | North America | $416,056 | $390,052 | | International | $117,504 | $97,546 | | Products and Systems | $10,892 | $11,280 | | Corporate and eliminations | $26,591 | $24,160 | | Total | $571,043 | $523,038 | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three and six months ended June 30, 2025 and 2024 [Forward-Looking Statements](index=30&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements subject to various risks and uncertainties, including impacts from tariffs, trade policy, and ERP system implementation - The report contains forward-looking statements subject to risks and uncertainties, including impacts from tariffs, trade policy changes, and the implementation of a new ERP system[128](index=128&type=chunk)[129](index=129&type=chunk) [Overview](index=30&type=section&id=Overview) Mistras Group, Inc. is a multinational provider of integrated technology-enabled asset protection solutions, leveraging its OneSuite™ platform, with strong liquidity and ongoing monitoring of macroeconomic factors - Mistras Group, Inc. is a multinational provider of integrated technology-enabled asset protection solutions, focusing on safety and operational uptime for critical industrial and civil assets[130](index=130&type=chunk)[131](index=131&type=chunk) - The company enhances client value through its OneSuite™ platform, an Industrial Internet of Things (IoT)-connected digital software and monitoring solution, centralizing integrity data and offering over **90** applications[132](index=132&type=chunk)[139](index=139&type=chunk) - Core capabilities include non-destructive testing (NDT) field inspections, laboratory services, sensing technologies, NDT equipment, and asset integrity engineering[134](index=134&type=chunk) - The company's cash balance was approximately **$20.0 million** as of June 30, 2025, maintaining strong liquidity with its Credit Agreement[140](index=140&type=chunk) - The company is monitoring the impact of continuing inflationary pressures, tariffs, trade barriers, and geopolitical conflicts (Russia-Ukraine, Middle East) on its business, particularly higher energy costs in European operations[144](index=144&type=chunk) [Note About Non-GAAP Measures](index=32&type=section&id=Note%20About%20Non-GAAP%20Measures) The company utilizes 'Income (loss) from operations before special items' as a non-GAAP financial measure to evaluate operating performance and liquidity, excluding specific non-recurring expenses - The company uses 'Income (loss) from operations before special items' as a non-GAAP financial measure to evaluate operating performance and liquidity, excluding acquisition-related expenses, impairment charges, reorganization costs, and other special items[145](index=145&type=chunk) - This non-GAAP measure is used for consistent period-to-period comparison, planning, and forecasting, but is not a substitute for GAAP measures and may not be comparable to other companies' non-GAAP measures[145](index=145&type=chunk) [Consolidated Results of Operations](index=32&type=section&id=Consolidated%20Results%20of%20Operations) This section provides a detailed analysis of the company's consolidated financial performance, covering revenue, gross profit, operating expenses, and income from operations for the periods presented [Revenue](index=33&type=section&id=Revenue) Total revenue decreased by 2.3% for the three months and 7.3% for the six months ended June 30, 2025, primarily due to declines in North America and the Oil and Gas segment, despite growth in International Consolidated Revenue (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $185,405 | $189,773 | $347,020 | $374,215 | - Total revenue decreased by **$4.4 million** (**2.3%**) for the three months ended June 30, 2025, and by **$27.2 million** (**7.3%**) for the six months ended June 30, 2025, primarily due to organic decreases and voluntary laboratory consolidations[147](index=147&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk) - North America segment revenue decreased by **5.4%** (three months) and **9.7%** (six months) due to declines in Oil and Gas and other key markets, impacted by macroeconomic factors[149](index=149&type=chunk)[151](index=151&type=chunk) - International segment revenue increased by **14.0%** (three months) and **7.4%** (six months) due to high/mid-single-digit organic growth and favorable foreign exchange rates[149](index=149&type=chunk)[151](index=151&type=chunk) Oil and Gas Revenue by Sub-category (in thousands) | Sub-category | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Upstream | $38,180 | $41,013 | $75,000 | $80,527 | | Midstream | $18,575 | $20,786 | $33,916 | $39,319 | | Downstream | $46,061 | $47,457 | $90,464 | $102,575 | | Total | $102,816 | $109,256 | $199,380 | $222,421 | - Oil and Gas revenue decreased across all sub-categories for both periods, with Upstream down **7%**, Midstream down **11-14%**, and Downstream down **3-12%**, primarily due to market share losses, decreased exploration, and fewer customer turnarounds[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) Revenue by Type (in thousands) | Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Field Services | $123,484 | $134,528 | $233,659 | $260,883 | | Shop Laboratories | $15,682 | $16,938 | $30,711 | $34,133 | | Data Analytical Solutions | $18,330 | $18,342 | $32,311 | $33,881 | | Other | $27,909 | $19,965 | $50,339 | $45,318 | - Field Services and Shop Laboratory revenues decreased, while 'Other' revenue increased due to higher sales in the defense sector within North America[158](index=158&type=chunk)[159](index=159&type=chunk)[161](index=161&type=chunk) [Gross Profit](index=36&type=section&id=Gross%20Profit) Gross profit increased by $2.6 million (5.1%) for the three months ended June 30, 2025, driven by an improved business mix and operating efficiencies, leading to margin improvement across all segments Consolidated Gross Profit (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross profit | $53,945 | $51,340 | $94,837 | $97,492 | | Gross profit as a % of Revenue | 29.1% | 27.1% | 27.3% | 26.1% | - Gross profit increased by **$2.6 million** (**5.1%**) for the three months ended June 30, 2025, primarily due to an improved business mix and operating efficiencies[162](index=162&type=chunk) - Gross profit margin improved to **29.1%** (three months) and **27.3%** (six months) in 2025, up from **27.1%** and **26.1%** in 2024, respectively[146](index=146&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) - North America's gross profit margin increased by **1.8%** (three months) and **1.0%** (six months) due to improved business mix and operating efficiencies. International's margin increased by **2.5%** (three months) and **1.0%** (six months) due to a favorable sales mix. Products and Systems' margin increased by **2.7%** (three months) and **4.7%** (six months) also due to a favorable sales mix[166](index=166&type=chunk)[167](index=167&type=chunk) [Operating Expenses](index=38&type=section&id=Operating%20Expenses) Operating expenses increased by $6.1 million (15.6%) for the three months and $7.4 million (9%) for the six months ended June 30, 2025, driven by higher SG&A, reorganization, and new environmental costs Operating Expenses (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Selling, general and administrative expenses | $39,793 | $36,181 | $75,445 | $72,431 | | Reorganization and other costs | $2,951 | $518 | $6,038 | $2,076 | | Environmental expense | $518 | $0 | $1,058 | $0 | | Total Operating Expenses | $45,517 | $39,381 | $87,421 | $79,981 | | % of total revenue | 24.6% | 20.8% | 25.2% | 21.4% | - Selling, general and administrative expenses increased by **$3.6 million** (three months) and **$3.0 million** (six months) due to adverse foreign exchange impact, partially offset by cost containment[170](index=170&type=chunk)[171](index=171&type=chunk) - Reorganization and other costs increased by **$2.4 million** (three months) and **$4.0 million** (six months) due to continued headcount calibration and related costs[170](index=170&type=chunk)[171](index=171&type=chunk) - Environmental expense increased by **$0.5 million** (three months) and **$1.1 million** (six months) due to costs incurred in 2025 that were not present in the prior year[170](index=170&type=chunk)[171](index=171&type=chunk) [Income (loss) from Operations](index=39&type=section&id=Income%20(loss)%20from%20Operations) GAAP income from operations decreased by $3.5 million (29.5%) for the three months and $10.1 million (58%) for the six months ended June 30, 2025, with non-GAAP income also declining Income (Loss) from Operations (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income from operations (GAAP) | $8,428 | $11,959 | $7,416 | $17,511 | | Income from operations before special items (non-GAAP) | $11,897 | $12,537 | $14,512 | $19,647 | - GAAP income from operations decreased by **$3.5 million** (**29.5%**) for the three months and **$10.1 million** (**58%**) for the six months ended June 30, 2025[173](index=173&type=chunk)[174](index=174&type=chunk) - Non-GAAP income from operations before special items decreased by **$0.6 million** (**5.1%**) for the three months and **$5.1 million** (**26%**) for the six months ended June 30, 2025[173](index=173&type=chunk)[174](index=174&type=chunk) - As a percentage of revenue, non-GAAP income from operations before special items decreased by **20 basis points** to **6.4%** (three months) and by **110 basis points** to **4.2%** (six months)[173](index=173&type=chunk)[174](index=174&type=chunk) [Interest Expense](index=40&type=section&id=Interest%20Expense) Interest expense decreased by $0.2 million for the three months and $1.2 million for the six months ended June 30, 2025, primarily due to lower debt balances Interest Expense (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest expense | $4,239 | $4,413 | $7,563 | $8,842 | - The decrease in interest expense was a result of lower debt balances during the periods[175](index=175&type=chunk) [Income Taxes](index=40&type=section&id=Income%20Taxes) The effective income tax rate for the three months ended June 30, 2025, was 25.4% and for the six months was 71.4%, with fluctuations attributed to discrete items and the company evaluating the OBBBA - Effective income tax rate for Q2 2025 was **25.4%** (higher than statutory due to favorable stock compensation discrete item), compared to **15.5%** in Q2 2024 (lower than statutory due to favorable stock compensation discrete item)[176](index=176&type=chunk)[177](index=177&type=chunk) - Effective income tax rate for H1 2025 was **71.4%** (higher than statutory due to favorable stock compensation discrete item), compared to **14.9%** in H1 2024 (lower than statutory due to reversal of valuation allowances)[176](index=176&type=chunk)[178](index=178&type=chunk) - The company is currently evaluating the impact of the One Big Beautiful Bill Act (OBBBA) enacted on July 4, 2025[180](index=180&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) Cash used in operating activities increased significantly in H1 2025 due to working capital changes and ERP system delays, while financing activities provided more cash from increased debt borrowings, maintaining strong liquidity Cash Flows Summary (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(3,619) | $5,115 | | Net cash used in investing activities | $(11,416) | $(11,217) | | Net cash provided by financing activities | $14,910 | $5,261 | | Net change in cash and cash equivalents | $1,640 | $(469) | - Cash used in operating activities was **$3.6 million** in H1 2025, a decrease of **$8.7 million** (**171%**) year-on-year, mainly due to increased days sales outstanding, working capital movements, and delays from a new ERP system conversion[182](index=182&type=chunk)[183](index=183&type=chunk) - Cash used in investing activities increased slightly by **$0.2 million** to **$11.4 million** in H1 2025, primarily due to higher capital expenditures for property, plant, and equipment[184](index=184&type=chunk) - Net cash provided by financing activities increased to **$14.9 million** in H1 2025 from **$5.3 million** in H1 2024, driven by **$9.8 million** higher net debt borrowings[185](index=185&type=chunk) - As of June 30, 2025, the company had **$20.0 million** in cash and cash equivalents and **$102.6 million** of unused commitments under its Credit Agreement, indicating sufficient liquidity for the foreseeable future[187](index=187&type=chunk) - The company was in compliance with all terms and covenants of its Credit Agreement as of June 30, 2025[188](index=188&type=chunk) [Critical Accounting Policies and Estimates](index=42&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There have been no significant changes to the company's critical accounting policies and estimates since the 2024 Annual Report - There have been no significant changes to the company's critical accounting policies and estimates since the 2024 Annual Report[191](index=191&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) There have been no significant changes to the company's quantitative and qualitative disclosures about market risk since its 2024 Annual Report - No material changes to quantitative and qualitative disclosures about market risk have occurred since the 2024 Annual Report[192](index=192&type=chunk) [ITEM 4. Controls and Procedures](index=42&type=section&id=ITEM%204.%20Controls%20and%20Procedures) As of June 30, 2025, the company's management concluded that its disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - As of June 30, 2025, the company's disclosure controls and procedures were deemed effective by management, including the CEO and CFO[193](index=193&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[194](index=194&type=chunk) PART II—OTHER INFORMATION This section includes legal proceedings, risk factors, equity sales, defaults, other disclosures, and exhibits [ITEM 1. Legal Proceedings](index=43&type=section&id=ITEM%201.%20Legal%20Proceedings) The company's legal proceedings are detailed in Note 13 of the financial statements, with no material developments beyond what is disclosed there or in the 2024 Annual Report - Legal proceedings are described in Note 13 to the Unaudited Condensed Consolidated Financial Statements, with no material developments beyond those disclosed[197](index=197&type=chunk) [ITEM 1.A. Risk Factors](index=43&type=section&id=ITEM%201.A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report - No material changes to risk factors have occurred since the 2024 Annual Report[198](index=198&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company had no unregistered sales of equity securities or use of proceeds from public offerings, but acquired 1,800 shares from employees for tax withholding obligations - No unregistered sales of equity securities or use of proceeds from public offerings occurred[199](index=199&type=chunk)[200](index=200&type=chunk) Shares Acquired for Tax Withholding (Quarter Ended June 30, 2025) | Month Ending | Total Number of Shares Purchased | Average Price Paid per Share | | :----------- | :------------------------------- | :--------------------------- | | April 30, 2025 | — | — | | May 31, 2025 | 1,800 | $7.44 | | June 30, 2025 | — | — | [ITEM 3. Defaults Upon Senior Securities](index=43&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[203](index=203&type=chunk) [ITEM 4. Mine Safety Disclosures](index=43&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable[204](index=204&type=chunk) [ITEM 5. Other Information](index=43&type=section&id=ITEM%205.%20Other%20Information) No directors, officers, or the company adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three and six months ended June 30, 2025 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three and six months ended June 30, 2025[205](index=205&type=chunk) - The company did not adopt, terminate, or modify any Rule 10b5-1 trading arrangements during the three and six months ended June 30, 2025[206](index=206&type=chunk) [ITEM 6. Exhibits](index=44&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, and Inline XBRL documents - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer, as well as various Inline XBRL documents[207](index=207&type=chunk) [SIGNATURES](index=45&type=section&id=SIGNATURES) The report is duly signed on behalf of Mistras Group, Inc. by Edward J. Prajzner, Senior Executive Vice President and Chief Financial Officer, on August 11, 2025 - The report was signed by Edward J. Prajzner, Senior Executive Vice President and Chief Financial Officer, on August 11, 2025[211](index=211&type=chunk)

[Cautionary Statement Regarding Forward-Looking Statements](index=4&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD%20LOOKING%20STATEMENTS) This statement advises that the report contains forward-looking information, subject to risks that could cause actual results to differ materially, and the Company disclaims any obligation to update these statements [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section details that the report includes forward-looking statements about future performance and plans, listing various risk factors that could cause actual outcomes to differ, with no obligation for the Company to update them - The report contains forward-looking statements about future financial performance, business goals, strategic investment plans, revenues, operating income, cash flows, and capital investments[8](index=8&type=chunk) - Actual future events and results could differ materially due to factors such as general operational performance, reliance on key suppliers, ability to satisfy major carrier customers, network expansion capabilities, technological changes, access to capital, government regulations, economic downturns, management transitions, and increased competition[8](index=8&type=chunk) - The Company undertakes no obligation to update these forward-looking statements, except as required by law[8](index=8&type=chunk) [PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This part presents the Company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Unaudited Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for ATN International, Inc. and its subsidiaries, providing a snapshot of the company's financial health and performance [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the unaudited condensed consolidated balance sheets, detailing assets, liabilities, and equity for the specified periods Condensed Consolidated Balance Sheets (In Thousands) | ASSETS (June 30, 2025) | Amount ($) | ASSETS (December 31, 2024) | Amount ($) | | :----------------------- | :--------- | :--------------------------- | :--------- | | Cash and cash equivalents | 98,965 | Cash and cash equivalents | 73,393 | | Total current assets | 327,752 | Total current assets | 309,161 | | Fixed assets, net | 1,010,631 | Fixed assets, net | 1,040,193 | | Total assets | 1,707,006 | Total assets | 1,727,103 | | **LIABILITIES & EQUITY** | | **LIABILITIES & EQUITY** | | | Total current liabilities| 269,024 | Total current liabilities | 267,314 | | Long-term debt, excluding current portion | 568,548 | Long-term debt, excluding current portion | 549,130 | | Total liabilities | 1,060,519 | Total liabilities | 1,055,349 | | Total equity | 567,772 | Total equity | 595,451 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the unaudited condensed consolidated statements of operations, outlining revenues, expenses, and net income (loss) for the specified periods Condensed Consolidated Statements of Operations (In Thousands, Except Per Share Data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $181,300 | $183,281 | $360,594 | $370,076 | | Total operating expenses | $181,067 | $158,965 | $357,694 | $341,186 | | Income from operations | $233 | $24,316 | $2,900 | $28,890 | | Income (loss) before income taxes | $(13,036) | $11,541 | $(24,614) | $5,213 | | NET INCOME (LOSS) | $(9,260) | $11,337 | $(20,647) | $3,391 | | NET INCOME (LOSS) ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS | $(7,026) | $9,003 | $(15,954) | $2,690 | | Basic EPS | $(0.56) | $0.50 | $(1.25) | $— | | Diluted EPS | $(0.56) | $0.50 | $(1.25) | $— | | Dividends per share | $0.275 | $0.24 | $0.515 | $0.48 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) This section presents the unaudited condensed consolidated statements of comprehensive income (loss), including net income (loss) and other comprehensive income (loss) Condensed Consolidated Statements of Comprehensive Income (Loss) (In Thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(9,260) | $11,337 | $(20,647) | $3,391 | | Other comprehensive income (loss) | $426 | $290 | $857 | $1,722 | | Comprehensive income (loss) | $(8,834) | $11,627 | $(19,790) | $5,113 | | Comprehensive loss attributable to ATN International, Inc. | $(6,600) | $9,293 | $(15,097) | $4,412 | [Condensed Consolidated Statements of Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) This section presents the unaudited condensed consolidated statements of equity, detailing changes in common stock, retained earnings, and total equity Condensed Consolidated Statements of Equity (In Thousands) | Equity Component | Balance, March 31, 2025 | Balance, June 30, 2025 | Balance, March 31, 2024 | Balance, June 30, 2024 | | :----------------- | :---------------------- | :--------------------- | :---------------------- | :--------------------- | | Common Stock | $180 | $181 | $173 | $173 | | Treasury Stock | $(103,143) | $(103,183) | $(92,463) | $(102,379) | | Additional Paid-In Capital | $214,362 | $216,856 | $207,551 | $209,944 | | Retained Earnings | $350,728 | $333,231 | $405,031 | $409,043 | | Accumulated Other Comprehensive Income/(Loss) | $11,208 | $11,634 | $9,700 | $9,990 | | Total ATNI Stockholders' Equity | $473,335 | $458,719 | $529,992 | $526,771 | | Noncontrolling Interests | $107,385 | $109,053 | $98,724 | $101,994 | | Total Equity | $580,720 | $567,772 | $628,716 | $628,765 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the unaudited condensed consolidated statements of cash flows, categorizing cash movements from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In Thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :----------------------------- | :----------------------------- | | Operating Activities | $59,843 | $58,410 | | Investing Activities | $(45,636) | $(46,843) | | Financing Activities | $9,864 | $(481) | | Net change in cash, cash equivalents, and restricted cash | $24,071 | $11,086 | | Total cash, cash equivalents, and restricted cash, end of period | $113,315 | $73,253 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the accounting policies, significant estimates, and specific financial statement line items [1. Organization and Business Operations](index=11&type=section&id=1.%20ORGANIZATION%20AND%20BUSINESS%20OPERATIONS) This note describes ATN International, Inc.'s business as a digital infrastructure and communications provider, its operating segments, and recent operational developments - ATN International, Inc. provides digital infrastructure and communications services in rural/remote US and international markets (Bermuda, Cayman Islands, Guyana, US Virgin Islands)[23](index=23&type=chunk)[28](index=28&type=chunk) - The Company operates two segments: US Telecom (fixed, carrier, managed services in Alaska and western US) and International Telecom (fixed, carrier, mobility, managed services in Bermuda, Cayman Islands, Guyana, US Virgin Islands)[26](index=26&type=chunk)[28](index=28&type=chunk) - Rebranding efforts include GTT in Guyana to 'One Communications' (OneGY) in 2024 and Viya in US Virgin Islands to 'One Communications' (OneVI) in Q2 2025[29](index=29&type=chunk) - As of June 30, 2025, **$7.8 million** of US Telecom telecommunication licenses were reclassified as assets held for sale, with an expected pre-tax gain of approximately **$6.0 million** upon completion in H2 2025[31](index=31&type=chunk) Restructuring and Reorganization Expenses (In Thousands) | Segment | Three months ended June 30, 2025 | Six months ended June 30, 2025 | | :---------------- | :------------------------------- | :----------------------------- | | International Telecom | $1,385 | $2,891 | | US Telecom | $2,357 | $2,491 | | Corporate and Other | $1,165 | $1,355 | | **Total** | **$4,907** | **$6,737** | [2. Basis of Presentation](index=14&type=section&id=2.%20BASIS%20OF%20PRESENTATION) This note explains the basis for preparing the unaudited condensed consolidated financial statements, including compliance with SEC rules and GAAP, and recent accounting pronouncements - The financial statements are unaudited, prepared in accordance with SEC rules and GAAP, and include normal recurring adjustments[34](index=34&type=chunk) - The Company is assessing the impact of ASU 2023-09 (Enhancements to Income Tax Disclosures), effective for annual periods after December 15, 2024, and ASU 2024-03 (Disaggregation of Income Statements Expenses), effective for annual periods after December 15, 2026[36](index=36&type=chunk)[37](index=37&type=chunk) [3. Revenue Recognition and Receivables](index=15&type=section&id=3.%20REVENUE%20RECOGNITION%20AND%20RECEIVABLES) This note details the Company's revenue recognition policies, disaggregated revenue, contract assets and liabilities, and allowance for credit losses Total Revenue by Segment and Recognition Timing (In Thousands) | Segment/Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | International Telecom (ASC 606) | $93,304 | $93,889 | $186,332 | $185,483 | | US Telecom (ASC 606) | $73,180 | $75,477 | $144,791 | $156,791 | | Total Revenue (ASC 606) | $166,484 | $169,366 | $331,123 | $342,274 | | Operating lease income | $2,048 | $2,111 | $4,031 | $4,217 | | Government support revenue | $12,768 | $11,804 | $25,440 | $23,585 | | **Total Revenue** | **$181,300** | **$183,281** | **$360,594** | **$370,076** | Contract Assets and Liabilities (In Thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :---------------------- | :------------ | :---------------- | :--------- | :--------- | | Contract asset – current | $3,526 | $3,920 | $(394) | (10.1)% | | Contract asset – noncurrent | $4,701 | $5,368 | $(667) | (12.4)% | | Contract liability – current | $(30,917) | $(28,932) | $(1,985) | 6.9% | | Contract liability – noncurrent | $(51,393) | $(55,116) | $3,723 | (6.8)% | | Net contract liability | $(74,083) | $(74,760) | $677 | (0.9)% | - Remaining performance obligations totaled **$580 million** at June 30, 2025, with approximately **44%** expected to be satisfied within 24 months and **$60 million** annually from 2027-2032[44](index=44&type=chunk) Allowance for Credit Losses Activity (In Thousands) | Item | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $15,132 | $16,362 | | Current period provision for expected losses | $4,135 | $2,855 | | Write-offs charged against the allowance | $(5,326) | $(2,918) | | Recoveries collected | $147 | $133 | | Balance at end of period | $14,088 | $16,432 | [4. Leases](index=18&type=section&id=4.%20LEASES) This note provides information on the Company's operating and financing leases, including costs, cash flows, and weighted-average terms and discount rates Total Operating and Finance Lease Costs (In Thousands) | Lease Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating lease cost | $9,195 | $8,078 | $18,388 | $15,677 | | Total finance lease cost | $2,120 | $1,245 | $4,376 | $2,156 | Weighted-Average Lease Terms and Discount Rates | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Weighted-average remaining lease term (Operating) | 12.0 years | 12.6 years | | Weighted-average remaining lease term (Financing) | 5.8 years | 11.5 years | | Weighted-average discount rate (Operating) | 7.0% | 6.8% | | Weighted-average discount rate (Financing) | 8.5% | 7.4% | - For the six months ended June 30, 2025, the Company recorded **$4.0 million** in lease income as a lessor, primarily from Carrier Services revenue[59](index=59&type=chunk) [5. Use of Estimates](index=21&type=section&id=5.%20USE%20OF%20ESTIMATES) This note explains that financial statement preparation involves management estimates and assumptions, which may differ from actual results - Financial statements rely on management estimates and assumptions, particularly for revenue recognition, goodwill, long-lived intangible assets, income taxes, and contingencies[61](index=61&type=chunk) - Estimates are based on historical experience and reasonable assumptions, but actual results may differ significantly[61](index=61&type=chunk) [6. Fair Value Measurements and Investments](index=21&type=section&id=6.%20FAIR%20VALUE%20MEASUREMENTS%20AND%20INVESTMENTS) This note details fair value measurements for assets and liabilities, categorizing them by input observability, and discusses other investments and debt valuation Assets and Liabilities Measured at Fair Value (In Thousands) | Description | June 30, 2025 (Total) | December 31, 2024 (Total) | | :------------------------------------------ | :-------------------- | :------------------------ | | Short term investments | $395 | $300 | | Employee benefit plan investments | $2,199 | $2,768 | | Interest rate swap | $98 | $(723) | | Warrants on Alaska Communications redeemable common units | $0 | $(249) | | **Total assets and liabilities measured at fair value** | **$2,692** | **$2,096** | - The Company holds **$41.956 million** in investments without a readily determinable fair value as of June 30, 2025, included in other assets[67](index=67&type=chunk) - Redeemable common units and warrants are recorded at the higher of historical cost or fair value, with Alloy common units carried at historical cost (**$10.0 million** at June 30, 2025) exceeding fair value[68](index=68&type=chunk) Fair Value vs. Book Value of Debt (In Millions) | Debt Type | June 30, 2025 (Fair Value) | June 30, 2025 (Book Value) | December 31, 2024 (Fair Value) | December 31, 2024 (Book Value) | | :-------------------------------- | :--------------------------- | :--------------------------- | :----------------------------- | :----------------------------- | | Long-term debt | $590.4 | $583.4 | $564.4 | $557.4 | | Customer receivable credit facility | $39.9 | $40.2 | $42.7 | $44.2 | [7. Long-Term Debt](index=26&type=section&id=7.%20LONG-TERM%20DEBT) This note outlines the Company's various long-term debt facilities, including terms, interest rates, covenants, and maturity schedules - The 2023 CoBank Credit Facility includes a **$170 million** revolving credit facility and a **$130 million** term loan, with **$124.3 million** outstanding on the term loan and **$76.6 million** on the revolving loan as of June 30, 2025[73](index=73&type=chunk)[78](index=78&type=chunk) The Company was in compliance with all financial covenants[78](index=78&type=chunk) - The 2024 Alaska Credit Facility provides a **$300 million** term loan and a **$90 million** revolving facility, with **$300.0 million** outstanding on the term loan and **$5.0 million** on the revolving loan as of June 30, 2025[81](index=81&type=chunk)[82](index=82&type=chunk) The Company is not a guarantor for this debt[91](index=91&type=chunk) - The FirstNet Receivables Credit Facility has **$40.5 million** outstanding as of June 30, 2025, secured by AT&T receivables under the FirstNet Agreement[100](index=100&type=chunk) - OneGY entered into 2025 IDB Credit Facilities for a **$10.0 million** revolving facility and up to **$30.0 million** term loan, with **$5.0 million** outstanding on the revolving facility as of June 30, 2025[102](index=102&type=chunk)[108](index=108&type=chunk) - The Sacred Wind Term Debt has **$23.2 million** outstanding as of June 30, 2025, with fixed interest rates from **0.88% to 5.0%**[111](index=111&type=chunk) Sacred Wind was in compliance with its corrective action plan for a financial covenant[112](index=112&type=chunk) - The OneVI Debt has **$60.0 million** outstanding as of June 30, 2025, with a fixed interest rate of **4.0%** and maturity on July 1, 2026[113](index=113&type=chunk)[115](index=115&type=chunk) The Net Leverage Ratio covenant was amended to **7.0 to 1.0** and the Company was in compliance as of December 31, 2024[116](index=116&type=chunk) NCSC issued a commitment letter to extend the maturity to July 1, 2035[116](index=116&type=chunk) Annual Maturities of Debt Instruments (In Thousands) | Amounts Maturing During | US Telecom | International Telecom | Corporate and Other | Total Debt | Customer Receivable Credit Facility | | :-------------------------------- | :--------- | :-------------------- | :------------------ | :--------- | :---------------------------------- | | July 1, 2025 through December 31, 2025 | $1,778 | $5,000 | $3,250 | $10,028 | $3,960 | | Year ending December 31, 2026 | $5,469 | $60,000 | $8,125 | $73,594 | $8,409 | | Year ending December 31, 2027 | $13,098 | $— | $9,750 | $22,848 | $8,807 | | Year ending December 31, 2028 | $18,858 | $— | $86,370 | $105,228 | $9,229 | | Year ending December 31, 2029 | $282,749 | $— | $93,438 | $376,187 | $6,041 | | Thereafter | $6,239 | $— | $— | $6,239 | $4,085 | | **Total** | **$328,191** | **$65,000** | **$200,933** | **$594,124** | **$40,531** | | Debt Discounts | $(7,719) | $(100) | $(2,906) | $(10,725) | $(309) | | **Book Value as of June 30, 2025** | **$320,472** | **$64,900** | **$198,027** | **$583,399** | **$40,222** | [8. Government Support and Spectrum Matters](index=37&type=section&id=8.%20GOVERNMENT%20SUPPORT%20AND%20SPECTRUM%20MATTERS) This note details the Company's participation in government funding programs, including USF, construction grants, and the Replace and Remove Program, outlining funding and obligations - The Company receives federal USF support, including **$25.6 million** annually from the Alaska Connect Fund (ACF) until 2028, approximately **$105 million** over 14 years from Enhanced Alternative Connect America Model (E-ACAM), and **$8.0 million** annually from Connect America Fund II (CAF II) in the rural southwest until July 2028[119](index=119&type=chunk) - The Company was awarded **$2.3 million** annually from the Rural Digital Opportunity Fund Phase I (RDOF) auction through 2031, but transferred **$1.3 million** and returned **$0.7 million** of these awards by June 2025, incurring a **$1.9 million** loss related to RDOF transfers[119](index=119&type=chunk)[121](index=121&type=chunk) Communication Services Revenue from Government Programs (In Thousands) | Program | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | High cost support | $4,471 | $4,876 | $8,899 | $9,723 | | CAF II (including ACF) | $8,227 | $6,784 | $16,397 | $13,571 | | RDOF | $69 | $145 | $144 | $290 | | ECF | $— | $498 | $— | $7,312 | | RHC | $4,353 | $3,682 | $8,715 | $7,119 | | Other | $1,571 | $1,862 | $3,212 | $8,877 | | **Total** | **$18,691** | **$17,847** | **$37,367** | **$46,892** | - The Company was awarded **$103.8 million** in construction grants as of June 30, 2025, after new grants of **$15.8 million** and rescinded grants of **$52.5 million** (including **$51 million** from NTIA's BEAD Program)[127](index=127&type=chunk)[128](index=128&type=chunk) - As a sub-recipient, the Company is involved in tribal government grants (TBCP, ReConnect) totaling **$239 million** as of June 30, 2025, having received **$23.5 million** in funding and spent **$25.4 million** on construction[129](index=129&type=chunk) - The Replace and Remove Program allocation increased to approximately **$517 million** (from **$207 million**) in December 2024, with a project completion deadline extended to Q2 2026[131](index=131&type=chunk) Replace and Remove Program Expenditures and Reimbursements (In Thousands) | Item | Capital (June 30, 2025) | Operating (June 30, 2025) | Total (June 30, 2025) | Capital (June 30, 2024) | Operating (June 30, 2024) | Total (June 30, 2024) | | :-------------------------- | :---------------------- | :------------------------ | :-------------------- | :---------------------- | :------------------------ | :-------------------- | | Total spend | $167,827 | $32,657 | $200,484 | $87,388 | $24,654 | $112,042 | | Total reimbursements | $(135,480) | $(32,267) | $(167,747) | $(54,194) | $(15,075) | $(69,269) | | Amount pending reimbursement | $32,347 | $390 | $32,737 | $33,194 | $9,579 | $42,773 | [9. Retirement Plans](index=43&type=section&id=9.%20RETIREMENT%20PLANS) This note describes the Company's multi-employer and noncontributory defined benefit pension and postretirement plans, including net periodic benefit costs - The Company participates in the Alaska Electrical Pension Fund (AEPF), a multi-employer defined benefit plan, which was not in endangered or critical status[133](index=133&type=chunk) - The Company also has noncontributory defined benefit pension and postretirement plans, with most benefits frozen and no new participants allowed[134](index=134&type=chunk) Net Periodic Pension and Postretirement Benefit Costs (In Thousands) | Benefit Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net periodic pension expense (benefit) | $22 | $106 | $44 | $214 | | Net periodic postretirement expense (benefit) | $54 | $33 | $109 | $67 | [10. Income Taxes](index=43&type=section&id=10.%20INCOME%20TAXES) This note details the Company's effective tax rates, income tax expenses/benefits, and key factors influencing these rates, such as valuation allowances and discrete items Income Tax Rates and Impact (In Millions) | Period | Pretax Income (Loss) | Income Tax Expense (Benefit) | Effective Tax Rate | | :------------------------------- | :------------------- | :--------------------------- | :----------------- | | Three months ended June 30, 2025 | $(13.0) | $(3.8) | 29.0% | | Three months ended June 30, 2024 | $11.5 | $0.2 | 1.8% | | Six months ended June 30, 2025 | $(24.6) | $(4.0) | 16.1% | | Six months ended June 30, 2024 | $5.2 | $1.8 | 35.0% | - For Q2 2025, the effective tax rate was impacted by a **$4.9 million** benefit from reversing an unrecognized tax position, a **$0.6 million** expense for interest on uncertain tax positions, and a **$1.0 million** benefit from releasing a capital loss carryover valuation allowance[138](index=138&type=chunk)[140](index=140&type=chunk) - For Q2 2024, the effective tax rate was impacted by a **$2.4 million** expense from a foreign land sale gain, a **$3.7 million** benefit from reversing an unrecognized tax position, and a **$0.8 million** expense for interest on unrecognized tax positions[141](index=141&type=chunk) [11. Earnings Per Share and Redeemable Noncontrolling Interests](index=46&type=section&id=11.%20EARNINGS%20PER%20SHARE%20AND%20REDEEMABLE%20NONCONTROLLING%20INTERESTS) This note reconciles basic and diluted earnings per share and explains the accounting for redeemable noncontrolling interests, including their allocation of net income/loss Earnings Per Share Reconciliation (In Thousands, Except Per Share Data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to ATN International, Inc. stockholders- Basic | $(7,026) | $9,003 | $(15,954) | $2,690 | | Less: Preferred dividends | $(1,507) | $(1,376) | $(2,965) | $(2,727) | | Net loss attributable to ATN International, Inc. common stockholders- Diluted | $(8,533) | $7,627 | $(18,919) | $(37) | | Weighted-average shares outstanding- Basic | 15,223 | 15,254 | 15,177 | 15,346 | | Weighted-average shares outstanding- Diluted | 15,223 | 15,255 | 15,177 | 15,346 | - The Company allocated losses of **$5.1 million** and **$2.7 million** to redeemable common units for the three months ended June 30, 2025 and 2024, respectively, and **$8.7 million** and **$6.2 million** for the six months ended June 30, 2025 and 2024, respectively[151](index=151&type=chunk) Roll Forward of Redeemable Noncontrolling Interests (In Thousands) | Item | Redeemable Preferred Units (June 30, 2025) | Redeemable Common Units (June 30, 2025) | Total Redeemable Noncontrolling Interests (June 30, 2025) | | :-------------------- | :----------------------------------------- | :---------------------------------------- | :-------------------------------------------------------- | | Balance, Dec 31, 2024 | $65,704 | $10,599 | $76,303 | | Accrued preferred dividend | $2,965 | $— | $2,965 | | Allocated net loss | $— | $(8,746) | $(8,746) | | Change in fair value | $— | $8,193 | $8,193 | | **Balance, June 30, 2025** | **$68,669** | **$10,046** | **$78,715** | [12. Segment Reporting](index=49&type=section&id=12.%20SEGMENT%20REPORTING) This note provides detailed financial information for the International Telecom and US Telecom segments, including revenue, operating income, and capital expenditures Segment Revenue and Operating Income (Three Months Ended June 30, 2025, In Thousands) | Segment | Total Revenue | Income (loss) from operations | | :---------------- | :------------ | :---------------------------- | | International Telecom | $94,894 | $16,221 | | US Telecom | $86,406 | $(5,533) | | Corporate and Other | $— | $(10,455) | | **Consolidated** | **$181,300** | **$233** | Segment Revenue and Operating Income (Six Months Ended June 30, 2025, In Thousands) | Segment | Total Revenue | Income (loss) from operations | | :---------------- | :------------ | :---------------------------- | | International Telecom | $189,390 | $30,970 | | US Telecom | $171,204 | $(7,948) | | Corporate and Other | $— | $(20,122) | | **Consolidated** | **$360,594** | **$2,900** | Selected Segment Balance Sheet Data (June 30, 2025, In Thousands) | Segment | Cash, cash equivalents, and restricted cash | Total assets | Total debt, including current portion | | :---------------- | :------------------------------------------ | :----------- | :------------------------------------ | | International Telecom | $66,726 | $701,302 | $64,900 | | US Telecom | $44,866 | $914,121 | $320,472 | | Corporate and Other | $1,723 | $91,583 | $198,027 | | **Consolidated** | **$113,315** | **$1,707,006** | **$583,399** | Capital Expenditures by Segment (Six Months Ended June 30, In Thousands) | Segment | 2025 Capital Expenditures | 2024 Capital Expenditures | | :---------------- | :------------------------ | :------------------------ | | International Telecom | $20,270 | $28,951 | | US Telecom | $67,650 | $77,498 | | Corporate and Other | $2 | $1,579 | | **Consolidated** | **$87,922** | **$108,028** | [13. Commitments and Contingencies](index=55&type=section&id=13.%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the Company's involvement in regulatory and litigation matters, including spectrum fee disputes, international bypass allegations, tax claims, and an FCC settlement - OneGY is engaged in ongoing disputes with the Telecommunications Authority (TA) in Guyana regarding spectrum fee calculation methodology since 2006[169](index=169&type=chunk) - OneGY has filed lawsuits against Digicel for alleged international bypass in violation of exclusive license rights, with cases pending in the Court of Appeals in Guyana[170](index=170&type=chunk) - OneGY is involved in tax claims with the Guyana Revenue Authority (GRA) dating back to 1991, primarily concerning the deductibility of intercompany advisory fees[171](index=171&type=chunk) - Alaska Communications settled with the FCC Enforcement Bureau for **$6.3 million** (a **$5.3 million** cash payment and **$1.0 million** receivable forgiveness) regarding the Rural Health Care Support Program, and entered a three-year compliance agreement[172](index=172&type=chunk) - The Company has accrued **$15.3 million** as of June 30, 2025, for probable adverse outcomes in these and other legal/regulatory matters[173](index=173&type=chunk) [14. Subsequent Events](index=56&type=section&id=14.%20SUBSEQUENT%20EVENTS) This note discloses the signing of the One Big Beautiful Bill Act and the Company's assessment of its non-material financial impact for FY2025 - The One Big Beautiful Bill Act was signed into law on July 4, 2025[174](index=174&type=chunk) The Company is evaluating its impact but does not anticipate material financial statement impacts for FY2025[174](index=174&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=58&type=section&id=Item%202%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, analyzing revenue, expenses, and segment performance [Overview](index=58&type=section&id=Overview) This section provides an overview of ATN International's business, operating segments, key agreements (FirstNet, Verizon CMS), and participation in government support programs - ATN International is a leading provider of digital infrastructure and communications services, focusing on rural and remote markets in the US and internationally (Bermuda, Cayman Islands, Guyana, US Virgin Islands)[176](index=176&type=chunk)[179](index=179&type=chunk)[181](index=181&type=chunk) - The Company operates two segments: US Telecom (fixed, carrier, managed services in Alaska and western US) and International Telecom (fixed, carrier, mobility, managed services in international markets)[179](index=179&type=chunk) - The FirstNet Agreement involves building AT&T's network in the western US, with **$77 million** in construction revenue recorded through June 30, 2025, and an expected **$6 million** more by the end of 2025[183](index=183&type=chunk) - The Verizon CMS Agreement involves upgrading wireless service and providing network, infrastructure, and technical services to Verizon in the southwestern US, with an initial term ending in 2030[185](index=185&type=chunk)[187](index=187&type=chunk) - The Company receives various USF high-cost support, including **$25.6 million** annually from ACF (Alaska Connect Fund) until 2028, approximately **$105 million** over 14 years from E-ACAM, and **$8 million** annually from CAF II until July 2028[192](index=192&type=chunk) - As of June 30, 2025, the Company was awarded **$103.8 million** in construction grants and is a sub-recipient of tribal government grants totaling **$239 million**[194](index=194&type=chunk)[196](index=196&type=chunk) - The Replace and Remove Program allocation increased to approximately **$517 million**, with **$200.5 million** incurred in expenditures by June 30, 2025, and **$37.0 million** in reimbursements received during the six months ended June 30, 2025[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) [Selected Segment Financial Information](index=65&type=section&id=Selected%20Segment%20Financial%20Information) This section presents selected financial data for the International Telecom and US Telecom segments, including total revenue and income (loss) from operations Selected Segment Financial Information (Three Months Ended June 30, 2025, In Thousands) | Segment | Total Revenue | Income (loss) from operations | | :---------------- | :------------ | :---------------------------- | | International Telecom | $94,894 | $16,221 | | US Telecom | $86,406 | $(5,533) | | Corporate and Other | $— | $(10,455) | | **Consolidated** | **$181,300** | **$233** | Selected Segment Financial Information (Three Months Ended June 30, 2024, In Thousands) | Segment | Total Revenue | Income (loss) from operations | | :---------------- | :------------ | :---------------------------- | | International Telecom | $95,357 | $32,405 | | US Telecom | $87,924 | $884 | | Corporate and Other | $— | $(8,973) | | **Consolidated** | **$183,281** | **$24,316** | [Comparison of Segment Results (Three Months)](index=70&type=section&id=Comparison%20of%20Segment%20Results%20%28Three%20Months%29) This section analyzes the changes in revenue and operating income/loss for the International Telecom and US Telecom segments for the three months ended June 30 - International Telecom revenue decreased by **$0.5 million (0.5%)** to **$94.9 million**, primarily due to declines in Mobility, Fixed, and Carrier Services, partially offset by ancillary services[207](index=207&type=chunk) - International Telecom operating expenses increased by **$15.7 million (24.9%)** to **$78.7 million**, largely due to a **$15.8 million** gain on asset disposition in the prior year and **$1.4 million** in restructuring expenses in the current period[208](index=208&type=chunk) - International Telecom operating income decreased by **$16.2 million (50.0%)** to **$16.2 million**[209](index=209&type=chunk) - US Telecom revenue decreased by **$1.5 million (1.7%)** to **$86.4 million**, mainly due to a **$1.1 million** reduction in Fixed revenues (impacted by ECF and ACP conclusion), **$0.3 million** in Carrier Services, and **$0.8 million** in Mobility, partially offset by a **$1.4 million** increase in construction revenue[210](index=210&type=chunk) - US Telecom operating expenses increased by **$4.9 million (5.6%)** to **$91.9 million**, driven by **$2.4 million** in restructuring expenses and a **$2.6 million** increase in loss on asset disposition[211](index=211&type=chunk) - US Telecom operating income shifted to a loss of **$5.5 million** from an income of **$0.9 million**[212](index=212&type=chunk) [Comparison of Consolidated Results (Three Months)](index=71&type=section&id=Comparison%20of%20Consolidated%20Results%20%28Three%20Months%29) This section provides a consolidated comparison of key financial metrics, including revenue, operating expenses, and net income (loss), for the three months ended June 30 Consolidated Results (Three Months Ended June 30, In Thousands) | Metric | 2025 | 2024 | Amount of Increase (Decrease) | Percent Increase (Decrease) | | :------------------------------------------ | :----- | :----- | :---------------------------- | :-------------------------- | | Communication services revenue | $174,874 | $177,365 | $(2,491) | (1.4)% | | Construction revenue | $2,216 | $820 | $1,396 | 170.2% | | Other revenue | $4,210 | $5,096 | $(886) | (17.4)% | | **Total revenue** | **$181,300** | **$183,281** | **$(1,981)** | **(1.1)%** | | Total operating expenses | $181,067 | $158,965 | $22,102 | 13.9% | | Income from operations | $233 | $24,316 | $(24,083) | (99.0)% | | Income (loss) before income taxes | $(13,036) | $11,541 | $(24,577) | (213.0)% | | NET INCOME (LOSS) | $(9,260) | $11,337 | $(20,597) | (181.7)% | | NET INCOME (LOSS) ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS | $(7,026) | $9,003 | $(16,029) | (178.0)% | [Communications Services Revenue](index=72&type=section&id=Communications%20Services%20Revenue) This section details changes in Mobility, Fixed, Carrier Services, and Other Communications Services revenue for the three months ended June 30, by segment - Mobility revenue decreased by **$1.3 million (4.7%)** to **$26.3 million** for Q2 2025, driven by a **$0.5 million** decrease in International Telecom (business and consumer) and a **$0.8 million** decrease in US Telecom due to the conclusion of retail mobility services[216](index=216&type=chunk)[219](index=219&type=chunk) - Fixed revenue decreased by **$1.6 million (1.4%)** to **$113.1 million** for Q2 2025, primarily due to a **$0.5 million** decrease in International Telecom and a **$1.1 million** decrease in US Telecom, impacted by the conclusion of ECF and ACP programs[219](index=219&type=chunk)[220](index=220&type=chunk) - Carrier Services revenue decreased by **$0.5 million (1.5%)** to **$33.2 million** for Q2 2025, with a **$0.2 million** decrease in International Telecom (roaming) and a **$0.3 million** decrease in US Telecom (transition to carrier service management contracts)[225](index=225&type=chunk)[228](index=228&type=chunk) - Other Communications Services revenue increased by **$0.8 million (57.1%)** to **$2.2 million** for Q2 2025, due to increased ancillary services in International Telecom, partially offset by reduced non-recurring project revenue in US Telecom[226](index=226&type=chunk) [Construction Revenue](index=76&type=section&id=Construction%20Revenue) This section discusses the increase in construction revenue, primarily driven by completed FirstNet cell sites, for the three months ended June 30 - Construction revenue increased to **$2.2 million** for Q2 2025 from **$0.8 million** for Q2 2024, a **170.2%** increase, primarily due to an increase in completed FirstNet cell sites[214](index=214&type=chunk)[229](index=229&type=chunk) The build is expected to be substantially complete by the end of 2025[229](index=229&type=chunk) [Other Revenue](index=76&type=section&id=Other%20Revenue) This section details the decrease in Managed Services revenue for the three months ended June 30, across both International and US Telecom segments - Managed Services revenue decreased by **$0.9 million (17.6%)** to **$4.2 million** for Q2 2025, with decreases of **$0.4 million** in International Telecom and **$0.5 million** in US Telecom[230](index=230&type=chunk)[231](index=231&type=chunk) [Operating Expenses](index=76&type=section&id=Operating%20Expenses) This section analyzes changes in cost of communication services, construction revenue, SG&A, restructuring, depreciation, and asset disposition for the three months ended June 30 - Cost of communication services and other increased by **$1.1 million (1.45%)** to **$77.2 million** for Q2 2025[233](index=233&type=chunk) International Telecom remained consistent, while US Telecom increased by **$1.1 million** due to cell site rents, partially offset by cost savings and ECF program conclusion[233](index=233&type=chunk) - Cost of construction revenue increased to **$2.2 million** for Q2 2025 from **$0.8 million** for Q2 2024, a **168.5%** increase, due to more completed FirstNet sites[214](index=214&type=chunk)[236](index=236&type=chunk) - Selling, general and administrative expenses decreased by **$1.5 million (2.6%)** to **$56.2 million** for Q2 2025, driven by cost containment initiatives across all segments (International Telecom: **$0.4M** decrease, US Telecom: **$0.3M** decrease, Corporate Overhead: **$0.8M** decrease)[238](index=238&type=chunk)[242](index=242&type=chunk) - Restructuring and reorganization expenses totaled **$4.9 million** for Q2 2025 (International Telecom: **$1.4M**, US Telecom: **$2.4M**, Corporate and Other: **$1.2M**), with no such expenses in Q2 2024[214](index=214&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) - Depreciation and amortization expenses decreased by **$1.7 million (4.8%)** to **$33.9 million** for Q2 2025, due to reduced capital expenditures and fully depreciated assets in International Telecom (**$1.1M** decrease) and US Telecom (**$1.4M** decrease)[214](index=214&type=chunk)[247](index=247&type=chunk)[250](index=250&type=chunk) - Loss on disposition of assets and transfers was **$2.7 million** for Q2 2025 (International Telecom: **$0.1M**, US Telecom: **$2.6M**), compared to a **$15.9 million** gain in Q2 2024 (primarily from real estate sale in International Telecom)[214](index=214&type=chunk)[249](index=249&type=chunk)[251](index=251&type=chunk) [Other Income (Expense)](index=82&type=section&id=Other%20Income%20%28Expense%29) This section discusses changes in interest expense and other expenses, including foreign currency transaction losses, for the three months ended June 30 - Interest expense increased by **$0.5 million (3.8%)** to **$12.8 million** for Q2 2025, due to increased borrowings under credit facilities[214](index=214&type=chunk)[254](index=254&type=chunk) - Other expense was **$0.6 million** for Q2 2025, primarily from foreign currency transaction losses[255](index=255&type=chunk) [Income Taxes](index=82&type=section&id=Income%20Taxes) This section details the effective tax rates and income tax expenses/benefits for the three months ended June 30, highlighting influencing factors - The effective tax rate for Q2 2025 was **29.0%** (benefit of **$3.8 million** on a pretax loss of **$13.0 million**), compared to **1.8%** for Q2 2024 (expense of **$0.2 million** on a pretax income of **$11.5 million**)[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) [Net (income) loss attributable to noncontrolling interests, net of tax](index=84&type=section&id=Net%20%28income%29%20loss%20attributable%20to%20noncontrolling%20interests%2C%20net%20of%20tax) This section explains the allocation of net income or loss to noncontrolling interests for the three months ended June 30, by segment - Net loss attributable to noncontrolling interests was an allocation of **$2.2 million** in losses for Q2 2025, compared to **$2.3 million** in income for Q2 2024[260](index=260&type=chunk) - International Telecom's net income attributable to noncontrolling interests decreased by **$2.8 million** to an allocation of **$2.3 million** of income, largely due to the **$15.9 million** gain on asset disposition in Q2 2024[262](index=262&type=chunk) - US Telecom's net loss attributable to noncontrolling interests increased by **$1.7 million** to an allocation of **$4.5 million** in losses, due to increased losses at less than wholly owned subsidiaries[262](index=262&type=chunk) [Net income (loss) attributable to ATN International, Inc. stockholders](index=84&type=section&id=Net%20income%20%28loss%29%20attributable%20to%20ATN%20International%2C%20Inc.%20stockholders) This section presents the net income (loss) attributable to ATN International, Inc. stockholders and diluted EPS for the three months ended June 30 - Net loss attributable to ATN International, Inc. stockholders was **$7.0 million** for Q2 2025, compared to income of **$9.0 million** for Q2 2024[260](index=260&type=chunk) - Diluted EPS was a loss of **$0.56** for Q2 2025, compared to income of **$0.50** for Q2 2024, negatively impacted by preferred dividends of **$1.5 million** and **$1.4 million**, respectively[261](index=261&type=chunk) [Comparison of Segment Results (Six Months)](index=89&type=section&id=Comparison%20of%20Segment%20Results%20%28Six%20Months%29) This section analyzes the changes in revenue and operating income/loss for the International Telecom and US Telecom segments for the six months ended June 30 - International Telecom revenue increased by **$1.0 million (0.5%)** to **$189.4 million**, driven by ancillary services, partially offset by reductions in Mobility and Fixed revenue[266](index=266&type=chunk) - International Telecom operating expenses increased by **$14.1 million (9.8%)** to **$158.4 million**, influenced by a **$15.8 million** gain on asset disposition in the prior year and a **$1.7 million** increase in restructuring expenses[267](index=267&type=chunk) - International Telecom operating income decreased by **$13.2 million (29.9%)** to **$31.0 million**[268](index=268&type=chunk) - US Telecom revenue decreased by **$10.5 million (5.8%)** to **$171.2 million**, primarily due to a **$7.4 million** reduction in Fixed revenues (ECF and ACP conclusion), **$1.6 million** in Mobility, and **$1.1 million** in Carrier Services, partially offset by a **$0.9 million** increase in construction revenue[269](index=269&type=chunk) - US Telecom operating expenses decreased by **$1.0 million (0.6%)** to **$179.2 million**, due to reduced direct costs of services and cost savings initiatives[270](index=270&type=chunk) - US Telecom operating income shifted to a loss of **$7.9 million** from an income of **$1.5 million**[271](index=271&type=chunk) [Comparison of Consolidated Results (Six Months)](index=90&type=section&id=Comparison%20of%20Consolidated%20Results%20%28Six%20Months%29) This section provides a consolidated comparison of key financial metrics, including revenue, operating expenses, and net income (loss), for the six months ended June 30 Consolidated Results (Six Months Ended June 30, In Thousands) | Metric | 2025 | 2024 | Amount of Increase (Decrease) | Percent Increase (Decrease) | | :------------------------------------------ | :----- | :----- | :---------------------------- | :-------------------------- | | Communication services revenue | $348,905 | $358,633 | $(9,728) | (2.7)% | | Construction revenue | $3,262 | $2,406 | $856 | 35.6% | | Other revenue | $8,427 | $9,037 | $(610) | (6.8)% | | **Total revenue** | **$360,594** | **$370,076** | **$(9,482)** | **(2.6)%** | | Total operating expenses | $357,694 | $341,186 | $16,508 | 4.8% | | Income from operations | $2,900 | $28,890 | $(25,990) | (90.0)% | | Income (loss) before income taxes | $(24,614) | $5,213 | $(29,827) | (572.2)% | | NET INCOME (LOSS) | $(20,647) | $3,391 | $(24,038) | (708.9)% | | NET INCOME (LOSS) ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS | $(15,954) | $2,690 | $(18,644) | (693.1)% | [Communications Services Revenue](index=90&type=section&id=Communications%20Services%20Revenue) This section details changes in Mobility, Fixed, Carrier Services, and Other Communications Services revenue for the six months ended June 30, by segment - Mobility revenue decreased by **$2.1 million (3.9%)** to **$52.4 million** for H1 2025, due to a **$0.4 million** decrease in International Telecom (consumer equipment sales) and a **$1.6 million** decrease in US Telecom (conclusion of retail mobility services)[274](index=274&type=chunk)[276](index=276&type=chunk) - Fixed revenue decreased by **$7.8 million (3.3%)** to **$226.1 million** for H1 2025, primarily due to a **$0.4 million** decrease in International Telecom (business customers) and a **$7.4 million** decrease in US Telecom (conclusion of ECF and ACP programs)[277](index=277&type=chunk)[281](index=281&type=chunk) - Carrier Services revenue decreased by **$0.9 million (1.3%)** to **$66.4 million** for H1 2025, with a **$0.1 million** increase in International Telecom (roaming) offset by a **$1.1 million** decrease in US Telecom (transition to carrier service management contracts)[277](index=277&type=chunk)[281](index=281&type=chunk) - Other Communications Services revenue increased by **$1.1 million (37.9%)** to **$4.0 million** for H1 2025, due to increased project-related and ancillary services in International Telecom, partially offset by reduced non-recurring project revenue in US Telecom[278](index=278&type=chunk) [Construction Revenue](index=92&type=section&id=Construction%20Revenue) This section discusses the increase in construction revenue, primarily driven by completed FirstNet cell sites, for the six months ended June 30 - Construction revenue increased to **$3.3 million** for H1 2025 from **$2.4 million** for H1 2024, a **35.6%** increase, primarily due to an increase in completed FirstNet cell sites[273](index=273&type=chunk)[279](index=279&type=chunk] The build is expected to be substantially complete by the end of 2025[279](index=279&type=chunk) [Other Revenue](index=92&type=section&id=Other%20Revenue) This section details the decrease in Managed Services revenue for the six months ended June 30, across both International and US Telecom segments - Managed Services revenue decreased by **$0.6 million (6.7%)** to **$8.4 million** for H1 2025, with decreases of **$0.2 million** in International Telecom and **$0.4 million** in US Telecom[280](index=280&type=chunk) [Operating Expenses](index=92&type=section&id=Operating%20Expenses) This section analyzes changes in cost of communication services, construction revenue, SG&A, restructuring, depreciation, and asset disposition for the six months ended June 30 - Cost of communication services and other decreased by **$1.1 million (0.7%)** to **$155.4 million** for H1 2025[273](index=273&type=chunk)[284](index=284&type=chunk] International Telecom increased by **$0.7 million** (transport, doubtful accounts, maintenance), while US Telecom decreased by **$2.0 million** (cost savings, ECF program conclusion)[284](index=284&type=chunk) - Cost of construction revenue increased to **$3.7 million** for H1 2025 from **$2.4 million** for H1 2024, a **54.7%** increase, due to more completed FirstNet sites[273](index=273&type=chunk)[285](index=285&type=chunk) - Selling, general and administrative expenses decreased by **$7.6 million (6.4%)** to **$111.4 million** for H1 2025, due to cost containment initiatives across all segments (International Telecom: **$2.9M** decrease, US Telecom: **$2.8M** decrease, Corporate Overhead: **$1.8M** decrease)[273](index=273&type=chunk)[286](index=286&type=chunk)[289](index=289&type=chunk) - Transaction-related charges increased significantly to **$1.6 million** for H1 2025 from a nominal amount in H1 2024[273](index=273&type=chunk)[290](index=290&type=chunk) - Restructuring and reorganization expenses totaled **$6.7 million** for H1 2025 (International Telecom: **$2.9M**, US Telecom: **$2.5M**, Corporate and Other: **$1.4M**), compared to **$1.2 million** in H1 2024 (International Telecom)[273](index=273&type=chunk)[291](index=291&type=chunk)[292](index=292&type=chunk) - Depreciation and amortization expenses decreased by **$1.5 million (2.2%)** to **$68.4 million** for H1 2025, due to reduced capital expenditures and fully depreciated assets in International Telecom (**$1.9M** decrease) and US Telecom (**$1.3M** decrease)[273](index=273&type=chunk)[292](index=292&type=chunk)[296](index=296&type=chunk) - Loss on disposition of assets and transfers was **$3.4 million** for H1 2025 (International Telecom: **$0.4M**, US Telecom: **$3.0M**), compared to a **$16.4 million** gain in H1 2024 (primarily from real estate sale in International Telecom and renewable energy assets)[273](index=273&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) [Other Income (Expense)](index=98&type=section&id=Other%20Income%20%28Expense%29) This section discusses changes in interest income, interest expense, and other expenses, including foreign currency transaction losses, for the six months ended June 30 - Interest income decreased by **$0.2 million (31.1%)** to **$0.4 million** for H1 2025[273](index=273&type=chunk)[295](index=295&type=chunk) - Interest expense increased by **$0.9 million (3.8%)** to **$24.8 million** for H1 2025, due to increased borrowings[273](index=273&type=chunk)[298](index=298&type=chunk) - Other expense increased significantly to **$3.2 million** for H1 2025, primarily due to a non-operating employee-related matter and **$1.0 million** in foreign currency transaction losses[273](index=273&type=chunk)[298](index=298&type=chunk) [Income Taxes](index=98&type=section&id=Income%20Taxes) This section details the effective tax rates and income tax expenses/benefits for the six months ended June 30, highlighting influencing factors - The effective tax rate for H1 2025 was **16.1%** (benefit of **$4.0 million** on a pretax loss of **$24.6 million**), compared to **35.0%** for H1 2024 (expense of **$1.8 million** on a pretax income of **$5.2 million**)[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk) [Net (income) loss attributable to noncontrolling interests, net of tax](index=98&type=section&id=Net%20%28income%29%20loss%20attributable%20to%20noncontrolling%20interests%2C%20net%20of%20tax) This section explains the allocation of net income or loss to noncontrolling interests for the six months ended June 30, by segment - Net loss attributable to noncontrolling interests was an allocation of **$4.7 million** in losses for H1 2025, compared to **$0.7 million** in income for H1 2024[273](index=273&type=chunk)[303](index=303&type=chunk) - International Telecom's net income attributable to noncontrolling interests decreased by **$2.8 million** to an allocation of **$3.8 million** of income, largely due to the **$15.9 million** gain on asset disposition in H1 2024[303](index=303&type=chunk) - US Telecom's net loss attributable to noncontrolling interests increased by **$2.6 million** to an allocation of **$8.5 million** in losses, due to increased losses at less than wholly owned subsidiaries[304](index=304&type=chunk) [Net loss attributable to ATN International, Inc. stockholders](index=100&type=section&id=Net%20loss%20attributable%20to%20ATN%20International%2C%20Inc.%20stockholders) This section presents the net loss attributable to ATN International, Inc. stockholders and diluted EPS for the six months ended June 30 - Net loss attributable to ATN International, Inc. stockholders was **$16.0 million** for H1 2025, compared to **$2.7 million** for H1 2024[304](index=304&type=chunk) - Diluted EPS was a loss of **$1.25** for H1 2025, compared to break-even for

[Condensed Consolidated Interim Financial Statements](index=1&type=section&id=Condensed%20Consolidated%20Interim%20Financial%20Statements) This section presents the company's unaudited condensed consolidated interim financial statements [Condensed Consolidated Interim Statements of Income](index=2&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Income) For the three months ended June 30, 2025, Silvercorp Metals Inc. reported an increase in revenue but a decrease in net income and basic earnings per share compared to the same period in 2024 Condensed Consolidated Interim Statements of Income (USD thousands) | Metric | Three Months Ended June 30, 2025 (USD thousands) | Three Months Ended June 30, 2024 (USD thousands) | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | Revenue | **81,334** | **72,165** | | Cost of mine operations | **45,511** | **35,651** | | Income from mine operations | **35,823** | **36,514** | | Net income | **24,348** | **28,129** | | Basic earnings per share | **0.083** | **0.120** | | Diluted earnings per share | **0.082** | **0.120** | - Revenue increased by **$9.169 million (12.7%)** from **$72.165 million** in 2024 to **$81.334 million** in 2025[2](index=2&type=chunk) - Net income decreased by **$3.781 million (13.4%)** from **$28.129 million** in 2024 to **$24.348 million** in 2025[2](index=2&type=chunk) - Basic earnings per share decreased from **$0.120** in 2024 to **$0.083** in 2025[2](index=2&type=chunk) [Condensed Consolidated Interim Statements of Comprehensive Income](index=3&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Comprehensive%20Income) The company reported a significant increase in total comprehensive income for the three months ended June 30, 2025, primarily driven by a positive currency translation adjustment and a gain in fair value on equity investments, contrasting with losses in the prior year Condensed Consolidated Interim Statements of Comprehensive Income (USD thousands) | Metric | Three Months Ended June 30, 2025 (USD thousands) | Three Months Ended June 30, 2024 (USD thousands) | | :------------------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | | Net income | **24,348** | **28,129** | | Currency translation adjustment | **6,175** | (**4,228**) | | Share of other comprehensive income (loss) in associates | **472** | (**145**) | | Change in fair value on equity investments designated as FVTOCI | **756** | (**22**) | | Other comprehensive income (loss), net of taxes | **7,403** | (**4,395**) | | Total comprehensive income | **31,751** | **23,734** | - Total comprehensive income increased by **$8.017 million (33.8%)** from **$23.734 million** in 2024 to **$31.751 million** in 2025[3](index=3&type=chunk) - Currency translation adjustment shifted from a loss of **$4.228 million** in 2024 to a gain of **$6.175 million** in 2025[3](index=3&type=chunk) [Condensed Consolidated Interim Statements of Financial Position](index=4&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Financial%20Position) As of June 30, 2025, the company's total assets increased, primarily driven by higher cash and cash equivalents, other investments, and mineral rights and properties Condensed Consolidated Interim Statements of Financial Position (USD thousands) | Metric | June 30, 2025 (USD thousands) | March 31, 2025 (USD thousands) | | :-------------------------------- | :------------------------------ | :----------------------------- | | Total Assets | **1,178,185** | **1,138,941** | | Cash and cash equivalents | **376,112** | **363,978** | | Other investments | **24,483** | **17,277** | | Mineral rights and properties | **606,676** | **586,982** | | Total Liabilities | **320,947** | **305,553** | | Long-term portion of convertible notes | **109,892** | **108,193** | | Derivative liabilities | **55,625** | **50,768** | | Total Equity | **857,238** | **833,388** | - Total assets increased by **$39.244 million (3.4%)** from March 31, 2025, to June 30, 2025[4](index=4&type=chunk) - Cash and cash equivalents increased by **$12.134 million (3.3%)** from March 31, 2025, to June 30, 2025[4](index=4&type=chunk) - Total liabilities increased by **$15.394 million (5.0%)** from March 31, 2025, to June 30, 2025[4](index=4&type=chunk) [Condensed Consolidated Interim Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Cash%20Flows) For the three months ended June 30, 2025, the company experienced a significant increase in net cash provided by operating activities, while net cash used in investing activities decreased Condensed Consolidated Interim Statements of Cash Flows (USD thousands) | Metric | Three Months Ended June 30, 2025 (USD thousands) | Three Months Ended June 30, 2024 (USD thousands) | | :------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | | Net cash provided by operating activities | **48,281** | **39,955** | | Net cash (used in) provided by investing activities | (**24,554**) | (**40,709**) | | Net cash used in financing activities | (**13,118**) | (**5,868**) | | Increase in cash and cash equivalents | **12,134** | (**8,528**) | | Cash and cash equivalents, end of the period | **376,112** | **144,414** | - Net cash provided by operating activities increased by **$8.326 million (20.8%)** year-over-year[5](index=5&type=chunk) - Net cash used in investing activities decreased by **$16.155 million**, indicating less cash outflow compared to the prior year[5](index=5&type=chunk) - Net cash used in financing activities more than doubled, increasing by **$7.250 million**, primarily due to interest paid on convertible notes and higher non-controlling interest distributions[5](index=5&type=chunk) [Condensed Consolidated Interim Statements of Changes in Equity](index=6&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Changes%20in%20Equity) The company's total equity increased significantly from March 31, 2025, to June 30, 2025, driven by comprehensive income, share-based compensation, and the exercise of options, partially offset by dividends and distributions to non-controlling interests Condensed Consolidated Interim Statements of Changes in Equity (USD thousands) | Metric | As at June 30, 2025 (USD thousands) | As at March 31, 2025 (USD thousands) | | :------------------------------------------ | :---------------------------------- | :--------------------------------- | | Share capital | **413,924** | **411,960** | | Equity reserves | (**8,950**) | (**15,140**) | | Retained earnings | **321,044** | **305,908** | | Total equity attributable to equity holders | **726,018** | **702,728** | | Non-controlling interests | **131,220** | **130,660** | | Total Equity | **857,238** | **833,388** | - Total equity increased by **$23.850 million** from March 31, 2025, to June 30, 2025[7](index=7&type=chunk) - Share capital increased by **$1.964 million**, primarily due to options exercised[7](index=7&type=chunk)[6](index=6&type=chunk) - Retained earnings increased by **$15.136 million**, reflecting net income less dividends declared[7](index=7&type=chunk)[6](index=6&type=chunk) [Notes to Condensed Consolidated Interim Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Interim%20Financial%20Statements) This section provides detailed notes to the interim financial statements, covering accounting policies, segment data, and financial instruments [1. CORPORATE INFORMATION](index=8&type=section&id=1.%20CORPORATE%20INFORMATION) Silvercorp Metals Inc. is a Canadian-incorporated, publicly listed mining company with producing mines in China and exploration/development projects in China and Ecuador - The Company is engaged in the acquisition, exploration, development, and mining of mineral properties[8](index=8&type=chunk) - Producing mines are located in China, and current exploration and development projects are in China and Ecuador[8](index=8&type=chunk) - On July 31, 2024, the Company acquired a **75%** interest in the El Domo project and a **98.7%** interest in the Condor project through the acquisition of Adventus Mining Corporation, diversifying assets and expanding into Latin America[9](index=9&type=chunk) [2. MATERIAL ACCOUNTING POLICIES](index=8&type=section&id=2.%20MATERIAL%20ACCOUNTING%20POLICIES) The condensed consolidated interim financial statements are prepared in accordance with IAS 34. The company adopted amendments to IAS 21 (Lack of Exchangeability) effective April 1, 2025, with no material impact, and is currently evaluating the impact of new standards like IFRS 18 and amendments to IFRS 9 and IFRS 7, which are effective in future periods - These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standards **34** - Interim Financial Reporting ('IAS **34**') of the IFRS® Accounting Standards[11](index=11&type=chunk) - The Company adopted amendments to IAS **21** (Lack of Exchangeability) effective April 1, 2025, which did not have a material impact[13](index=13&type=chunk)[14](index=14&type=chunk) - The Company is currently evaluating the impact of IFRS **18** (effective January 1, 2027) and amendments to IFRS **9** and IFRS **7** (effective January 1, 2026) on its financial statements[18](index=18&type=chunk)[19](index=19&type=chunk) [2.a Statement of Compliance](index=8&type=section&id=2.a%20Statement%20of%20Compliance) This subsection outlines the company's adherence to IAS 34 for interim financial reporting - The unaudited condensed consolidated interim financial statements comply with IAS **34** and should be read with the audited annual financial statements for the year ended March 31, 2025[11](index=11&type=chunk) - The statements were authorized for issue by the Board of Directors on August 5, 2025[12](index=12&type=chunk) [2.b Adoption of New Accounting Standards, Interpretation or Amendments](index=8&type=section&id=2.b%20Adoption%20of%20New%20Accounting%20Standards,%20Interpretation%20or%20Amendments) This subsection details the adoption of IAS 21 amendments, effective April 1, 2025, with no material impact - The Company adopted amendments to IAS **21**, 'Lack of Exchangeability,' effective April 1, 2025, which clarify how to assess currency exchangeability and determine spot exchange rates when exchangeability is lacking[13](index=13&type=chunk) - These amendments did not have a material impact on the Company's interim financial statements[14](index=14&type=chunk) [2.c New Accounting Standards Issued but not effective](index=8&type=section&id=2.c%20New%20Accounting%20Standards%20Issued%20but%20not%20effective) This subsection identifies new accounting standards, including IFRS 18 and IFRS 9/7 amendments, issued but not yet effective - IFRS **18** 'Presentation and Disclosure in Financial Statements' (replacing IAS **1**) is effective for annual reporting periods beginning on or after January 1, 2027, with early adoption permitted[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) - Amendments to IFRS **9** and IFRS **7** regarding classification and measurement of financial instruments are effective for annual reporting periods beginning on or after January 1, 2026[19](index=19&type=chunk) [2.d Basis of Consolidation](index=9&type=section&id=2.d%20Basis%20of%20Consolidation) This subsection describes the consolidation principles for the company and its subsidiaries, including non-controlling interests - The condensed consolidated interim financial statements include the accounts of the Company and its wholly or partially owned subsidiaries, consolidated from the date control is obtained[20](index=20&type=chunk)[21](index=21&type=chunk) - Non-controlling interests are presented in the equity section for non-wholly owned subsidiaries, and net income attributable to them is calculated based on their ownership[22](index=22&type=chunk) Consolidated Subsidiaries | Name of subsidiaries | Principal activity | Place of incorporation | Ownership interest | | :------------------------------------ | :----------------- | :------------------- | :----------------- | | Henan Huawei Mining Co. Ltd. | Mining | China | **80%** | | Henan Found Mining Co. Ltd. | Mining | China | **77.5%** | | Xinshao Yunxiang Mining Co., Ltd. | Mining | China | **70%** | | Guangdong Found Mining Co. Ltd. | Mining | China | **99%** | | Shanxi Xinbaoyuan Mining Co., Ltd. | Mining | China | **77.5%** | | Curimining S.A | Mining | Ecuador | **75%** | | Condormine S.A | Mining | Ecuador | **98.7%** | [2.e Critical Accounting Judgments and Estimates](index=10&type=section&id=2.e%20Critical%20Accounting%20Judgments%20and%20Estimates) This subsection confirms the application of consistent critical accounting judgments and estimates as in prior annual financial statements - These condensed consolidated interim financial statements follow the same significant accounting judgments and estimates as those set out in Note **2** to the audited consolidated financial statements for the year ended March 31, 2025[26](index=26&type=chunk) [3. SEGMENTED INFORMATION](index=10&type=section&id=3.%20SEGMENTED%20INFORMATION) The company operates in the mining and metals industry, with reportable segments including producing mines in China (Ying Mining District, GC Mine) and development/exploration projects in Ecuador (El Domo, Condor) - The Company's significant operating segments include two producing properties in China (Ying Mining District, GC Mine) and two development and exploration projects in Ecuador (El Domo, Condor)[29](index=29&type=chunk) - An operating segment is defined by engaging in business activities that earn revenues or incur expenses, whose operating results are regularly reviewed by the chief operating decision maker, and for which discrete financial information is available[30](index=30&type=chunk) [3.a Segmented information for operating results](index=11&type=section&id=3.a%20Segmented%20information%20for%20operating%20results) This subsection provides a breakdown of operating results by segment, including revenue and net income (loss) Segmented Operating Results (USD thousands) | Segment | Three months ended June 30, 2025 (USD thousands) | Three months ended June 30, 2024 (USD thousands) | | :-------------------- | :----------------------------------------------- | :----------------------------------------------- | | **Revenue** | | | | Ying Mining District | **73,378** | **62,783** | | GC Mine | **7,956** | **9,382** | | Total Revenue | **81,334** | **72,165** | | **Net income (loss)** | | | | Ying Mining District | **29,099** | **28,228** | | GC Mine | **1,213** | **2,569** | | El Domo | (**567**) | — | | Condor | (**72**) | — | | Other | (**5,325**) | (**2,668**) | | Total Net Income | **24,348** | **28,129** | - Ying Mining District's revenue increased by **$10.595 million (16.9%)** year-over-year, while GC Mine's revenue decreased by **$1.426 million (15.2%)**[31](index=31&type=chunk) - Ecuador segments (El Domo and Condor) reported net losses in **2025**, reflecting their development stage[31](index=31&type=chunk) [3.b Segmented information for assets and liabilities](index=12&type=section&id=3.b%20Segmented%20information%20for%20assets%20and%20liabilities) This subsection presents segmented information for total assets and liabilities, highlighting changes across operating segments Segmented Assets and Liabilities (USD thousands) | Segment | Total Assets (June 30, 2025, USD thousands) | Total Assets (March 31, 2025, USD thousands) | | :-------------------- | :------------------------------------------ | :------------------------------------------- | | Ying Mining District | **523,799** | **506,816** | | GC Mine | **74,620** | **71,595** | | El Domo | **235,318** | **236,779** | | Condor | **28,313** | **28,057** | | Other | **316,135** | **295,694** | | Total Assets | **1,178,185** | **1,138,941** | | **Total Liabilities** | | | | Ying Mining District | **133,732** | **119,912** | | GC Mine | **11,335** | **10,263** | | El Domo | **1,876** | **4,303** | | Condor | **504** | **180** | | Other | **173,500** | **170,895** | | Total Liabilities | **320,947** | **305,553** | - Total assets for Ying Mining District increased by **$16.983 million**, and for GC Mine by **$3.025 million**, from March 31, 2025, to June 30, 2025[32](index=32&type=chunk) - El Domo's total assets slightly decreased, while Condor's increased, reflecting ongoing development activities[32](index=32&type=chunk) [3.c Sales by metal](index=13&type=section&id=3.c%20Sales%20by%20metal) This subsection details the company's revenue breakdown by metal type, including silver, gold, lead, and zinc Sales by Metal (USD thousands) | Metal | Three months ended June 30, 2025 (USD thousands) | Three months ended June 30, 2024 (USD thousands) | | :------ | :----------------------------------------------- | :----------------------------------------------- | | Silver | **54,024** | **45,798** | | Gold | **5,611** | **1,986** | | Lead | **14,616** | **15,583** | | Zinc | **4,993** | **6,581** | | Other | **2,090** | **2,217** | | Total | **81,334** | **72,165** | - Silver sales increased by **$8.226 million (17.9%)** year-over-year, remaining the largest revenue contributor[33](index=33&type=chunk) - Gold sales significantly increased by **$3.625 million (182.5%)** year-over-year[33](index=33&type=chunk) - Lead and Zinc sales decreased by **$0.967 million (6.2%)** and **$1.588 million (24.1%)** respectively[33](index=33&type=chunk) [3.d Major customers](index=13&type=section&id=3.d%20Major%20customers) This subsection identifies major customers and their contribution to total revenue, indicating customer concentration Major Customers Revenue (USD thousands) | Customer | Three months ended June 30, 2025 (USD thousands) | Percentage of total revenue (2025) | Three months ended June 30, 2024 (USD thousands) | Percentage of total revenue (2024) | | :--------- | :----------------------------------------------- | :--------------------------------- | :----------------------------------------------- | :--------------------------------- | | Customer A | **16,430** | **20%** | **12,058** | **17%** | | Customer D | **13,783** | **17%** | **13,116** | **18%** | | Customer E | **13,628** | **17%** | **16,468** | **23%** | | Customer B | **12,235** | **15%** | **16,169** | **22%** | | Customer C | **9,727** | **12%** | **3,112** | **4%** | | Total Major Customers | **65,803** | **81%** | **60,923** | **84%** | - Revenue from the top five customers accounted for **81%** of total revenue in Q2 **2025**, indicating high customer concentration[34](index=34&type=chunk) - Customer A's contribution to total revenue increased from **17%** in **2024** to **20%** in **2025**, while Customer E and B's percentages decreased[34](index=34&type=chunk) [4. GOVERNMENT FEES AND OTHER TAXES](index=14&type=section&id=4.%20GOVERNMENT%20FEES%20AND%20OTHER%20TAXES) Government fees and other taxes significantly increased for the three months ended June 30, 2025, primarily due to the introduction of a mineral rights royalty in Henan Province, China, which was not present in the prior year Government Fees and Other Taxes (USD thousands) | Item | Three Months Ended June 30, 2025 (USD thousands) | Three Months Ended June 30, 2024 (USD thousands) | | :---------------------- | :----------------------------------------------- | :----------------------------------------------- | | Government fees | **21** | **15** | | Mineral rights royalty | **1,481** | — | | Other taxes | **771** | **620** | | Total | **2,273** | **635** | - Total government fees and other taxes increased by **$1.638 million (257.9%)** year-over-year[35](index=35&type=chunk) - The introduction of a mineral rights royalty of **$1.481 million** in **2025**, pursuant to a new guideline in Henan, China, was the primary driver of the increase[35](index=35&type=chunk) - Other taxes include surtax on value-added tax, land usage levy, stamp duty, and other miscellaneous levies[36](index=36&type=chunk) [5. GENERAL AND ADMINISTRATIVE](index=14&type=section&id=5.%20GENERAL%20AND%20ADMINISTRATIVE) General and administrative expenses for both mining and corporate operations increased for the three months ended June 30, 2025 General and Administrative Expenses (USD thousands) | Item | Three Months Ended June 30, 2025 (USD thousands) | Three Months Ended June 30, 2024 (USD thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | **Mining Operations G&A** | | | | Amortization and depreciation | **231** | **278** | | Office administrative expenses | **558** | **688** | | Professional fees | **95** | **90** | | Salaries and benefits | **2,248** | **1,564** | | Total Mining G&A | **3,132** | **2,620** | | **Corporate Operations G&A** | | | | Amortization and depreciation | **206** | **178** | | Office administrative expenses | **1,000** | **665** | | Professional fees | **308** | **313** | | Salaries and benefits | **2,070** | **1,930** | | Share-based compensation | **1,194** | **1,201** | | Total Corporate G&A | **4,778** | **4,287** | - Mining operations general and administrative expenses increased by **$0.512 million (19.5%)** year-over-year, primarily driven by a **$0.684 million** increase in salaries and benefits[37](index=37&type=chunk) - Corporate general and administrative expenses increased by **$0.491 million (11.5%)** year-over-year, mainly due to higher office administrative expenses and salaries and benefits[37](index=37&type=chunk) [6. FINANCE ITEMS](index=15&type=section&id=6.%20FINANCE%20ITEMS) The company shifted from net finance income in Q2 2024 to net finance costs in Q2 2025, primarily due to a substantial increase in interest on convertible notes, which were not present in the prior year, despite a rise in interest income Finance Items (USD thousands) | Item | Three Months Ended June 30, 2025 (USD thousands) | Three Months Ended June 30, 2024 (USD thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Finance income (Interest income) | **3,308** | **1,680** | | Finance costs | | | | Interest on lease obligation | **84** | **30** | | Interest on convertible notes | **3,195** | — | | Accretion of environmental rehabilitation liabilities | **45** | **35** | | Total Finance Costs | **3,324** | **65** | | Net finance (costs) income | (**16**) | **1,615** | - Net finance items changed from an income of **$1.615 million** in **2024** to a cost of **$0.016 million** in **2025**[38](index=38&type=chunk) - Interest income increased by **$1.628 million (96.9%)** year-over-year[38](index=38&type=chunk) - Finance costs significantly increased by **$3.259 million**, primarily due to **$3.195 million** in interest on convertible notes, which were not present in the prior year[38](index=38&type=chunk) [7. INCOME TAX](index=15&type=section&id=7.%20INCOME%20TAX) Income tax expense decreased for the three months ended June 30, 2025, primarily due to a deferred income tax recovery, contrasting with a deferred tax expense in the prior year, despite an increase in current income tax Income Tax Expense (USD thousands) | Item | Three Months Ended June 30, 2025 (USD thousands) | Three Months Ended June 30, 2024 (USD thousands) | | :-------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Current income tax | **7,936** | **4,321** | | Deferred income tax | (**1,500**) | **3,026** | | Total Income tax expense | **6,436** | **7,347** | - Total income tax expense decreased by **$0.911 million (12.4%)** year-over-year[39](index=39&type=chunk) - Current income tax increased by **$3.615 million (83.6%)** year-over-year[39](index=39&type=chunk) - Deferred income tax shifted from an expense of **$3.026 million** in **2024** to a recovery of **$1.500 million** in **2025**[39](index=39&type=chunk) [8. SHORT-TERM INVESTMENTS](index=15&type=section&id=8.%20SHORT-TERM%20INVESTMENTS) Short-term investments significantly decreased as of June 30, 2025, primarily due to a substantial reduction in money market instruments Short-term Investments (USD thousands) | Item | June 30, 2025 (USD thousands) | March 31, 2025 (USD thousands) | | :---------------------------------- | :---------------------------- | :----------------------------- | | Bonds, defaulted and measured at fair value | **299** | **316** | | Money market instruments | **722** | **4,762** | | Total Short-term investments | **1,021** | **5,078** | - Short-term investments decreased by **$4.057 million (79.9%)** from March 31, 2025, to June 30, 2025[40](index=40&type=chunk) - Money market instruments saw a significant decrease of **$4.040 million**[40](index=40&type=chunk) [9. INVENTORIES](index=15&type=section&id=9.%20INVENTORIES) Inventories increased as of June 30, 2025, driven by higher ore stockpile and material and supplies, while concentrate inventory slightly decreased Inventories (USD thousands) | Item | June 30, 2025 (USD thousands) | March 31, 2025 (USD thousands) | | :------------------ | :---------------------------- | :----------------------------- | | Concentrate inventory | **1,662** | **1,800** | | Ore stockpile | **3,849** | **2,553** | | Material and supplies | **4,181** | **3,675** | | Total Inventories | **9,692** | **8,028** | - Total inventories increased by **$1.664 million (20.7%)** from March 31, 2025, to June 30, 2025[41](index=41&type=chunk) - Ore stockpile increased by **$1.296 million**, and material and supplies increased by **$0.506 million**[41](index=41&type=chunk) - Inventories recognized as expense during Q2 **2025** were **$38.4 million**, up from **$30.7 million** in Q2 **2024**[41](index=41&type=chunk) [10. OTHER INVESTMENTS](index=16&type=section&id=10.%20OTHER%20INVESTMENTS) Other investments significantly increased as of June 30, 2025, primarily due to higher investments designated as FVTPL (Fair Value Through Profit or Loss) in public companies and gains on these investments, along with new acquisitions Other Investments (USD thousands) | Item | June 30, 2025 (USD thousands) | March 31, 2025 (USD thousands) | | :---------------------------------- | :---------------------------- | :----------------------------- | | Investments designated as FVTOCI (Public companies) | **2,174** | **1,334** | | Investments designated as FVTPL (Public companies) | **19,775** | **13,409** | | Investments designated as FVTPL (Private companies) | **2,534** | **2,534** | | Total Other Investments | **24,483** | **17,277** | - Total other investments increased by **$7.206 million (41.7%)** from March 31, 2025, to June 30, 2025[42](index=42&type=chunk) - Investments designated as FVTPL in public companies increased by **$6.366 million**[42](index=42&type=chunk) - The company recorded a gain on equity investments designated as FVTPL of **$4.421 million** and FVTOCI of **$0.756 million** during the period[42](index=42&type=chunk) [11. INVESTMENT IN ASSOCIATES](index=16&type=section&id=11.%20INVESTMENT%20IN%20ASSOCIATES) The company holds significant influence investments in two Canadian public companies, New Pacific Metals Corp. (NUAG) and Tincorp Metals Inc. (TIN), accounted for using the equity method - The Company accounts for its investments in New Pacific Metals Corp. (NUAG) and Tincorp Metals Inc. (TIN) using the equity method, as it exercises significant influence over their financial and operating policies[43](index=43&type=chunk)[46](index=46&type=chunk) [11.a Investment in New Pacific Metals Corp.](index=16&type=section&id=11.a%20Investment%20in%20New%20Pacific%20Metals%20Corp.) This subsection details the company's equity method investment in New Pacific Metals Corp., including ownership and carrying value changes - As at June 30, 2025, the Company owned **48,341,452** common shares of NUAG, representing an ownership interest of **28.1%** (up from **27.3%** at March 31, 2025)[44](index=44&type=chunk) Investment in New Pacific Metals Corp. | Metric | As at June 30, 2025 | As at March 31, 2025 | | :-------------------------------- | :------------------ | :------------------- | | Number of shares | **48,341,452** | **46,907,701** | | Investment Amount (USD thousands) | **47,003** | **45,276** | | Market Value (USD thousands) | **64,778** | **51,598** | - The investment in NUAG increased by **$1.727 million** from March 31, 2025, to June 30, 2025, primarily due to open market purchases of **1,433,751** shares[45](index=45&type=chunk) [11.b Investment in Tincorp Metals Inc.](index=17&type=section&id=11.b%20Investment%20in%20Tincorp%20Metals%20Inc.) This subsection details the company's equity method investment in Tincorp Metals Inc., including ownership and carrying value changes - As at June 30, 2025, the Company owned **19,864,285** common shares of TIN, representing an ownership interest of **29.1%** (unchanged from March 31, 2025)[47](index=47&type=chunk) Investment in Tincorp Metals Inc. | Metric | As at June 30, 2025 | As at March 31, 2025 | | :-------------------------------- | :------------------ | :------------------- | | Number of shares | **19,864,285** | **19,864,285** | | Investment Amount (USD thousands) | **672** | **740** | | Market Value (USD thousands) | **2,184** | **2,073** | - The investment in TIN decreased by **$0.068 million** from March 31, 2025, to June 30, 2025, primarily due to a share of net loss from TIN[48](index=48&type=chunk) [12. INVESTMENT PROPERTIES](index=18&type=section&id=12.%20INVESTMENT%20PROPERTIES) Investment properties, consisting of real estate rented for income, remained stable in net carrying value as of June 30, 2025 Investment Properties (USD thousands) | Metric | As at June 30, 2025 (USD thousands) | As at March 31, 2025 (USD thousands) | | :-------------------- | :---------------------------------- | :--------------------------------- | | Costs | **1,241** | **1,231** | | Accumulated depreciation and amortization | (**738**) | (**720**) | | Net carrying value | **503** | **511** | - The net carrying value of investment properties slightly decreased by **$0.008 million** from March 31, 2025, to June 30, 2025[49](index=49&type=chunk) - The estimated fair value of the properties was approximately **$1.9 million** as at June 30, 2025, significantly higher than the carrying value[49](index=49&type=chunk) - Rental income of **$0.02 million** was recorded during the three months ended June 30, 2025[50](index=50&type=chunk) [13. PLANT AND EQUIPMENT](index=19&type=section&id=13.%20PLANT%20AND%20EQUIPMENT) The net carrying value of plant and equipment remained stable as of June 30, 2025, with additions and foreign currency translation impacts largely offset by disposals and depreciation Plant and Equipment (USD thousands) | Item | As at June 30, 2025 (USD thousands) | As at March 31, 2025 (USD thousands) | | :-------------------- | :---------------------------------- | :--------------------------------- | | Total Cost | **198,759** | **195,778** | | Total Accumulated amortization and impairment | (**104,486**) | (**101,985**) | | Total Carrying amounts | **94,273** | **93,793** | | Construction in progress | **3,797** | **3,726** | - The total carrying amount of plant and equipment increased by **$0.480 million** from March 31, 2025, to June 30, 2025[51](index=51&type=chunk) - Additions to plant and equipment totaled **$1.798 million** during the three months ended June 30, 2025[51](index=51&type=chunk) - Depreciation and amortization for the period amounted to **$2.477 million**[51](index=51&type=chunk) [14. MINERAL RIGHTS AND PROPERTIES](index=20&type=section&id=14.%20MINERAL%20RIGHTS%20AND%20PROPERTIES) Mineral rights and properties increased as of June 30, 2025, driven by capitalized expenditures in both producing and non-producing properties, particularly the El Domo and Condor projects acquired in July 2024 Mineral Rights and Properties (USD thousands) | Item | As at June 30, 2025 (USD thousands) | As at March 31, 2025 (USD thousands) | | :-------------------------- | :---------------------------------- | :--------------------------------- | | Producing mineral properties | **346,366** | **332,631** | | Non-producing mineral properties | **260,310** | **254,351** | | Total Mineral rights and properties | **606,676** | **586,982** | - Total mineral rights and properties increased by **$19.694 million (3.3%)** from March 31, 2025, to June 30, 2025[52](index=52&type=chunk) - Capitalized expenditures for producing properties totaled **$16.694 million**, and for non-producing properties, **$5.703 million** during the period[52](index=52&type=chunk) - The Constitutional Court of Ecuador rejected an Extraordinary Protection Action and a subsequent clarification motion, affirming the environmental license for the El Domo Project[54](index=54&type=chunk) [15. CONVERTIBLE NOTES](index=21&type=section&id=15.%20CONVERTIBLE%20NOTES) The company issued **$150 million** in unsecured Convertible Senior Notes in November 2024, maturing in December 2029 with a **4.75%** fixed interest rate - On November 25, 2024, the Company issued **$150 million** in unsecured Convertible Senior Notes, maturing on December 15, 2029, with a **4.75%** annual interest rate[55](index=55&type=chunk) - The conversion feature is accounted for as a derivative liability at fair value through profit or loss, while the host debt contract is at amortized cost[57](index=57&type=chunk) Convertible Notes (USD thousands) | Item | As at June 30, 2025 (USD thousands) | As at March 31, 2025 (USD thousands) | | :-------------------- | :---------------------------------- | :--------------------------------- | | Host liability | **110,185** | **110,653** | | Derivative liability | **53,678** | **49,028** | | Total Convertible Notes | **163,863** | **159,681** | | Current liability | **293** | **2,460** | | Non-current liability | **163,570** | **157,221** | - The derivative liability component increased by **$4.650 million** from March 31, 2025, to June 30, 2025, due to changes in fair value estimates[59](index=59&type=chunk) [16. LEASES](index=23&type=section&id=16.%20LEASES) The company's lease obligation, primarily for office space, slightly increased as of June 30, 2025, due to lease modifications and foreign exchange impact, partially offset by lease repayments Lease Obligations (USD thousands) | Item | As at June 30, 2025 (USD thousands) | As at March 31, 2025 (USD thousands) | | :-------------------- | :---------------------------------- | :--------------------------------- | | Balance, beginning of period | **1,331** | **1,315** | | Change due to lease modifications | **59** | — | | Interest accrual | **27** | **125** | | Lease repayment | (**65**) | (**271**) | | Foreign exchange impact | **60** | **4** | | Balance, end of period | **1,385** | **1,331** | | Current portion | **300** | **278** | | Non-current portion | **1,085** | **1,053** | - The total lease obligation increased by **$0.054 million** from March 31, 2025, to June 30, 2025[61](index=61&type=chunk) - The undiscounted contractual obligation for leases totals **$1.648 million**, with **$0.352 million** due within one year[61](index=61&type=chunk) - Lease obligations are discounted at rates ranging from **7.0%** to **15.6%**[61](index=61&type=chunk) [17. ENVIRONMENTAL REHABILITATION OBLIGATION](index=24&type=section&id=17.%20ENVIRONMENTAL%20REHABILITATION%20OBLIGATION) The environmental rehabilitation obligation remained stable as of June 30, 2025, with reclamation expenditures and unwinding of discount being the primary movements Environmental Rehabilitation Obligation (USD thousands) | Item | As at June 30, 2025 (USD thousands) | As at March 31, 2025 (USD thousands) | | :------------------------------------------ | :---------------------------------- | :--------------------------------- | | Balance, beginning of period | **9,639** | **6,442** | | Reclamation expenditures | (**195**) | (**819**) | | Unwinding of discount | **45** | **139** | | Foreign exchange impact | **123** | (**26**) | | Balance, end of period | **9,612** | **9,639** | - The environmental rehabilitation obligation slightly decreased by **$0.027 million** from March 31, 2025, to June 30, 2025[62](index=62&type=chunk) - The total undiscounted amount of estimated cash flows required to settle the provision was **$13.0 million** as at June 30, 2025, discounted at an average rate of **1.94%**[62](index=62&type=chunk) - Actual reclamation expenditures were **$0.2 million** during Q2 **2025**[63](index=63&type=chunk) [18. SHARE CAPITAL](index=24&type=section&id=18.%20SHARE%20CAPITAL) The company's share capital increased due to options exercised and share-based compensation, while maintaining a share-based compensation plan for stock options, restricted share units (RSUs), and performance share units (PSUs) - The Company has an unlimited number of common shares authorized without par value, all fully paid[65](index=65&type=chunk) - A total of **$1.2 million** in share-based compensation expense was recognized for the three months ended June 30, 2025[67](index=67&type=chunk) - Dividends of **$2.7 million**, or **$0.0125 per share**, were declared and paid during the three months ended June 30, 2025[74](index=74&type=chunk) [18.a Authorized](index=24&type=section&id=18.a%20Authorized) This subsection states the company's authorized share capital, consisting of an unlimited number of common shares without par value - The Company is authorized to issue an unlimited number of common shares without par value, all of which were fully paid as at June 30, 2025[65](index=65&type=chunk) [18.b Share-based compensation](index=24&type=section&id=18.b%20Share-based%20compensation) This subsection details the company's share-based compensation plans, including stock options, RSUs, and PSUs - The Company's share-based compensation plan includes stock options, restricted share units (RSUs), and performance share units (PSUs), with a rolling **10%** limit on common shares reserved for issuance[66](index=66&type=chunk) - A total of **$1.2 million** in share-based compensation expense was recognized for the three months ended June 30, 2025[67](index=67&type=chunk) [18.b.i Stock options](index=25&type=section&id=18.b.i%20Stock%20options) This subsection details the company's stock option plan, including grants, outstanding options, and valuation methods Stock Options | Metric | As at June 30, 2025 | As at March 31, 2025 | | :-------------------------------- | :------------------ | :------------------- | | Number of options outstanding | **2,206,814** | **2,279,980** | | Weighted average exercise price (CAD) | **6.20** | **6.20** | | Number of options exercisable | **1,702,647** | N/A | | Weighted average exercise price of exercisable options (CAD) | **6.63** | **6.54** | - **277,500** options were granted during Q2 **2025** with a weighted average exercise price of **CAD$5.06**[68](index=68&type=chunk) - The fair value of granted stock options was calculated using the Black-Scholes model with a risk-free interest rate of **2.63%** and expected volatility of **48.50%**[69](index=69&type=chunk) [18.b.ii Share purchase warrants](index=26&type=section&id=18.b.ii%20Share%20purchase%20warrants) This subsection describes the company's share purchase warrants, their reclassification to derivative liabilities, and valuation Share Purchase Warrants | Metric | As at June 30, 2025 | As at March 31, 2025 | | :-------------------------------- | :------------------ | :------------------- | | Number of warrants outstanding | **1,370,249** | **1,370,249** | | Weighted average exercise price (CAD) | **4.41** | **4.41** | | Balance of derivative liability (USD thousands) | **1,947** | **1,740** | - In October **2024**, CAD-denominated warrants were reclassified from equity to derivative liabilities at fair value due to a change in functional currency to USD[70](index=70&type=chunk) - The fair value of share purchase warrants was calculated using the Black-Scholes model with a risk-free interest rate of **2.60%** and expected volatility of **51.48%** as of June 30, 2025[71](index=71&type=chunk) [18.b.iii RSUs](index=27&type=section&id=18.b.iii%20RSUs) This subsection outlines the company's Restricted Share Units (RSUs) program, including grants and outstanding units Restricted Share Units (RSUs) | Metric | As at June 30, 2025 | As at March 31, 2025 | | :-------------------------------- | :------------------ | :------------------- | | Number of units outstanding | **3,035,996** | **2,197,873** | | Weighted average grant date closing price (CAD) | **4.76** | **4.58** | - **1,165,500** RSUs were granted during Q2 **2025** to directors, officers, and employees, vesting over a three-year term[72](index=72&type=chunk) - Subsequent to June 30, 2025, **311,333** RSUs were distributed[73](index=73&type=chunk) [18.c Cash dividends declared](index=27&type=section&id=18.c%20Cash%20dividends%20declared) This subsection reports the cash dividends declared and paid during the period - During the three months ended June 30, 2025, dividends of **$2.7 million**, or **$0.0125 per share**, were declared and paid[74](index=74&type=chunk) [18.d Normal course issuer bid](index=27&type=section&id=18.d%20Normal%20course%20issuer%20bid) This subsection describes the company's normal course issuer bid (NCIB) and share repurchase activity - The Company announced a normal course issuer bid (NCIB) on September 17, 2024, to repurchase up to **8,670,700** common shares until September 18, 2025[75](index=75&type=chunk) - No common shares were repurchased under the NCIB during the three months ended June 30, 2025[75](index=75&type=chunk) [19. ACCUMULATED OTHER COMPREHENSIVE LOSS](index=28&type=section&id=19.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) Accumulated other comprehensive loss decreased as of June 30, 2025, primarily due to a reduction in loss on currency translation adjustment and a gain on investments designated as FVTOCI Accumulated Other Comprehensive Loss (USD thousands) | Item | As at June 30, 2025 (USD thousands) | As at March 31, 2025 (USD thousands) | | :-------------------------------- | :---------------------------------- | :--------------------------------- | | Loss on investments designated as FVTOCI | **23,660** | **24,416** | | Share of loss in associate | **1,761** | **2,233** | | Loss on currency translation adjustment | **31,012** | **36,002** | | Total Accumulated other comprehensive loss | **56,433** | **62,651** | - Accumulated other comprehensive loss decreased by **$6.218 million** from March 31, 2025, to June 30, 2025[76](index=76&type=chunk) - The loss on currency translation adjustment decreased by **$4.990 million**[76](index=76&type=chunk) - The change in fair value on equity investments designated as FVTOCI, share of other comprehensive loss in associates, and currency translation adjustment are net of tax of **$nil**[76](index=76&type=chunk) [20. NON-CONTROLLING INTERESTS](index=28&type=section&id=20.%20NON-CONTROLLING%20INTERESTS) Non-controlling interests (NCI) slightly increased as of June 30, 2025, primarily due to their share of net income and other comprehensive income, partially offset by distributions Non-Controlling Interests (USD thousands) | Item | As at June 30, 2025 (USD thousands) | As at March 31, 2025 (USD thousands) | | :-------------------------------- | :---------------------------------- | :--------------------------------- | | Balance, beginning of period | **130,660** | **89,754** | | Share of net income (loss) | **6,222** | **20,579** | | Share of other comprehensive income | **1,185** | **144** | | Distribution | (**7,110**) | (**11,049**) | | Balance, end of period | **131,220** | **130,660** | - Total non-controlling interests increased by **$0.560 million** from March 31, 2025, to June 30, 2025[77](index=77&type=chunk) - Non-controlling interests' share of net income was **$6.222 million** for Q2 **2025**[77](index=77&type=chunk) - The effective percentage of non-controlling interest in Salazar Holding (El Domo Project) was **13.6%** as at June 30, 2025[77](index=77&type=chunk) [21. RELATED PARTY TRANSACTIONS](index=29&type=section&id=21.%20RELATED%20PARTY%20TRANSACTIONS) Related party balances due from NUAG and TIN increased as of June 30, 2025 Related Party Balances (USD thousands) | Related Party | As at June 30, 2025 (USD thousands) | As at March 31, 2025 (USD thousands) | | :-------------- | :---------------------------------- | :--------------------------------- | | NUAG | **99** | **33** | | TIN | **1,181** | **1,125** | | Total Due from related parties | **1,280** | **1,158** | - Balances due from related parties increased by **$0.122 million** from March 31, 2025, to June 30, 2025[79](index=79&type=chunk) - The Company recovers **$0.1 million** for services rendered to NUAG and **$0.06 million** for services rendered to TIN during Q2 **2025**[84](index=84&type=chunk) - An interest-free unsecured credit facility agreement with TIN was extended to January 31, 2026[80](index=80&type=chunk) [22. CAPITAL DISCLOSURES](index=29&type=section&id=22.%20CAPITAL%20DISCLOSURES) The company's capital management objectives are to support ongoing operations, mineral property development, and expansion plans - Capital management objectives include safeguarding the entity's ability to support normal operating requirements, continue development and exploration, and support expansionary plans[81](index=81&type=chunk) - Capital is primarily secured through profitable operations and issuances of equity capital[82](index=82&type=chunk) - Surplus capital is invested in short-term, liquid, and highly rated financial instruments[82](index=82&type=chunk) [23. FINANCIAL INSTRUMENTS](index=29&type=section&id=23.%20FINANCIAL%20INSTRUMENTS) The company manages various financial risks including liquidity, foreign exchange, interest rate, credit, equity price, and metal price risks - The Company manages exposure to financial risks including liquidity, foreign exchange, interest rate, credit, and equity price risk[83](index=83&type=chunk) - Financial instruments are classified within a fair value hierarchy (Level **1**, **2**, **3**) based on the significance of inputs used in measurements[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) - The Company is exposed to foreign exchange risk primarily relating to financial instruments denominated in RMB, CAD, and AUD[95](index=95&type=chunk) [23.a Fair value](index=30&type=section&id=23.a%20Fair%20value) This subsection details the fair value hierarchy of financial instruments, including cash, investments, and derivative liabilities Fair Value Hierarchy of Financial Instruments (USD thousands) | Item | Level 1 (USD thousands) | Level 2 (USD thousands) | Level 3 (USD thousands) | Total (USD thousands) | | :-------------------------------- | :---------------------- | :---------------------- | :---------------------- | :-------------------- | | **Financial assets (June 30, 2025)** | | | | | | Cash and cash equivalents | **376,112** | — | — | **376,112** | | Short-term investments | **1,021** | — | — | **1,021** | | Other investments | **21,949** | — | **2,534** | **24,483** | | **Financial liability (June 30, 2025)** | | | | | | Derivative liabilities | — | **55,625** | — | **55,625** | | **Financial assets (March 31, 2025)** | | | | | | Cash and cash equivalents | **363,978** | — | — | **363,978** | | Short-term investments | **4,762** | — | — | **4,762** | | Investments in public companies | **14,743** | — | — | **14,743** | | Investments in private companies | — | — | **2,534** | **2,534** | | **Financial liability (March 31, 2025)** | | | | | | Derivative liabilities | — | **50,768** | — | **50,768** | - Financial assets classified within Level **3** are equity investments in private companies and one public company suspended from quotation, valued using unobservable inputs[88](index=88&type=chunk) - There were no transfers into or out of Level **3** during the three months ended June 30, 2025 and 2024[90](index=90&type=chunk) [23.b Liquidity risk](index=30&type=section&id=23.b%20Liquidity%20risk) This subsection outlines the company's management of liquidity risk by monitoring cash flows and matching asset/liability maturities - The Company manages liquidity risk by monitoring actual and projected cash flows and matching the maturity profile of financial assets and liabilities[91](index=91&type=chunk) Contractual Obligations (USD thousands) | Contractual Obligation | Within a year (USD thousands) | 2-5 years (USD thousands) | Total (USD thousands) | | :----------------------------- | :---------------------------- | :------------------------ | :-------------------- | | Accounts payable and accrued liabilities | **68,172** | — | **68,172** | | Deposits received | **13,365** | — | **13,365** | | Convertible notes | **7,125** | **174,967** | **182,092** | | Lease obligation | **352** | **1,296** | **1,648** | | Total Contractual Obligation | **89,014** | **176,263** | **265,277** | [23.c Foreign exchange risk](index=31&type=section&id=23.c%20Foreign%20exchange%20risk) This subsection describes the company's exposure to foreign exchange risk, primarily from RMB, CAD, and AUD denominated instruments - The Company is exposed to foreign exchange risk primarily relating to financial instruments denominated in RMB (functional currency of Chinese subsidiaries), CAD, and AUD[95](index=95&type=chunk) - A +/- **10%** change in exchange rates would result in an approximate **$9.064 million** impact on RMB-denominated assets/liabilities, **$2.010 million** on CAD, and **$0.177 million** on AUD[96](index=96&type=chunk) - The Company currently does not engage in foreign exchange currency hedging[96](index=96&type=chunk) [23.d Interest rate risk](index=31&type=section&id=23.d%20Interest%20rate%20risk) This subsection details the company's exposure to interest rate risk on various financial instruments and its potential impact on net income - The Company is exposed to interest rate risk on its cash and cash equivalents, short-term investments, lease liabilities, convertible notes, and derivative instruments[97](index=97&type=chunk) - Due to the short-term nature of cash, cash equivalents, and short-term investments, fluctuations in interest rates would not have a significant impact on net income[97](index=97&type=chunk) - A **10 basis point** increase or decrease in market interest rate would result in an approximate **$0.2 million** increase (decrease) to net income due to derivative liabilities[99](index=99&type=chunk) [23.e Credit risk](index=32&type=section&id=23.e%20Credit%20risk) This subsection outlines the company's credit risk management, primarily associated with receivables and cash equivalents - The Company's credit risk is primarily associated with accounts receivable, due from related parties, cash and cash equivalents, and short-term investments[100](index=100&type=chunk) - The Company undertakes credit evaluations and requests deposits to mitigate credit risks[101](index=101&type=chunk) - There were no material amounts in trade or other receivables past due on June 30, 2025[101](index=101&type=chunk) [23.f Equity price risk](index=32&type=section&id=23.f%20Equity%20price%20risk) This subsection describes the company's exposure to equity price risk from marketable securities and its own share price impact on derivative liabilities - The Company holds marketable securities, mainly in mining companies, whose value fluctuates with market and commodity prices[102](index=102&type=chunk) - A **10%** increase (decrease) in the market price of securities held would result in an approximate **$2.4 million** increase (decrease) to net income[102](index=102&type=chunk) - A **10%** increase in the Company's share price would decrease net income by **$10.1 million**, while a **10%** decrease would increase net income by **$4.7 million**, due to derivative liabilities[103](index=103&type=chunk) [23.g Metal price risk](index=32&type=section&id=23.g%20Metal%20price%20risk) This subsection details the company's exposure to metal price risk for silver, lead, zinc, and gold, and factors influencing these prices - The Company primarily produces and sells silver, lead, zinc, and gold, with prices fixed against various Shanghai exchanges[104](index=104&type=chunk) - Metal prices are affected by numerous factors beyond the Company's control, including economic conditions, currency exchange, supply/demand, and speculative activities[105](index=105&type=chunk) - A significant decline in metal prices could impact the Company's operations, project development, and ability to fulfill obligations[106](index=106&type=chunk) [24. SUPPLEMENTARY CASH FLOW INFORMATION](index=33&type=section&id=24.%20SUPPLEMENTARY%20CASH%20FLOW%20INFORMATION) Supplementary cash flow information details changes in non-cash operating working capital, non-cash capital transactions, and the composition of cash and cash equivalents Supplementary Cash Flow Information (USD thousands) | Item | Three Months Ended June 30, 2025 (USD thousands) | Three Months Ended June 30, 2024 (USD thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | **Changes in non-cash operating working capital** | | | | Trade and other receivables | **352** | **1,721** | | Inventories | (**1,315**) | (**4,106**) | | Prepaids and deposits | (**363**) | (**3,069**) | | Accounts payable and accrued liabilities | **5,169** | **6,548** | | Deposits received | **5,951** | (**22**) | | Due from a related party | (**122**) | (**549**) | | Net change in non-cash operating working capital | **9,672** | **523** | | **Non-cash capital transactions** | | | | Additions of plant and equipment included in accounts payable | (**1,007**) | **828** | | Capital expenditures of mineral rights and properties included in accounts payable | (**564**) | **2,443** | | **Cash and cash equivalents** | | | | Cash on hand and at bank | **66,457** | N/A | | Bank term deposits and short-term money market investments | **309,655** | N/A | | Total cash and cash equivalents | **376,112** | N/A | - Changes in non-cash operating working capital provided **$9.672 million** in cash in Q2 **2025**, a significant increase from **$0.523 million** in Q2 **2024**[107](index=107&type=chunk) - Cash and cash equivalents at June 30, 2025, comprised **$66.457 million** in cash on hand and at bank, and **$309.655 million** in bank term deposits and short-term money market investments[107](index=107&type=chunk)

PART I. FINANCIAL INFORMATION Presents the company's unaudited consolidated financial statements, notes, management's discussion, market risk disclosures, and controls for the periods ended June 30, 2025 [Item 1. Consolidated Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated balance sheets, statements of income, comprehensive income, changes in shareholders' equity, and cash flows for the periods ended June 30, 2025, and 2024. It also includes detailed notes to the financial statements covering key accounting policies, segment information, and specifics on financial instruments such as securities, loans, derivatives, and details on the pending merger [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) Provides a detailed overview of the company's financial position, performance, and cash flows through balance sheets, income statements, and related notes Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$12,034,748** | **$12,273,408** | | Net Loans | $9,381,505 | $9,270,294 | | Total Securities | $1,172,530 | $1,188,859 | | **Total Liabilities** | **$10,812,437** | **$11,105,984** | | Total Deposits | $9,979,031 | $10,375,204 | | Total Borrowings | $585,597 | $438,094 | | **Total Shareholders' Equity** | **$1,222,311** | **$1,167,424** | Consolidated Income Statement Summary (in thousands) | Account | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $91,921 | $88,532 | $181,692 | $176,672 | | Provision for Credit Losses | $4,000 | $6,499 | $9,500 | $12,499 | | Total Non-interest Income (Loss) | $21,752 | $20,133 | $42,424 | $(12,466) | | Total Non-interest Expense | $68,144 | $70,931 | $138,510 | $146,951 | | **Net Income** | **$30,366** | **$24,025** | **$56,085** | **$3,837** | Earnings Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Diluted EPS | $0.66 | $0.57 | $1.22 | $0.09 | - For the six months ended June 30, 2025, net cash used by financing activities was **$298.9 million**, primarily due to a net decrease in deposits of **$396.2 million**, partially offset by a net increase in borrowings[18](index=18&type=chunk)[20](index=20&type=chunk) - Net cash used by investing activities was **$88.5 million**, driven by a net increase in loans of **$118.3 million**[18](index=18&type=chunk)[20](index=20&type=chunk) [Note 4. Loans and Allowance for Credit Losses](index=21&type=section&id=Note%204.%20Loans%20and%20Allowance%20for%20Credit%20Losses) Details the composition of the loan portfolio, changes in the allowance for credit losses, and trends in criticized and non-accrual loans Total Loans by Segment (in thousands) | Loan Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Commercial Real Estate (CRE) | $4,243,451 | $4,101,582 | | Commercial and Industrial | $1,493,719 | $1,439,175 | | Residential Real Estate | $2,796,343 | $2,771,769 | | Construction | $621,413 | $726,344 | | Home Equity & Consumer | $343,923 | $346,124 | | **Total Loans** | **$9,498,849** | **$9,384,994** | - The Allowance for Credit Losses on Loans (ACLL) increased to **$117.3 million** as of June 30, 2025, from **$114.7 million** at year-end 2024[50](index=50&type=chunk)[59](index=59&type=chunk) - The provision for credit losses for the first six months of 2025 was **$9.5 million**, with net charge-offs totaling **$6.9 million**[50](index=50&type=chunk)[59](index=59&type=chunk) - Total criticized loans (Special Mention and lower) increased to **$344.2 million** at June 30, 2025, from **$245.9 million** at December 31, 2024[74](index=74&type=chunk) - Non-accrual loans remained relatively stable at **$25.4 million**[74](index=74&type=chunk) - During the six months ended June 30, 2025, the company modified loans with an amortized cost basis of **$54.3 million** to borrowers experiencing financial difficulty, primarily through term extensions for commercial real estate and commercial & industrial loans[81](index=81&type=chunk) [Note 7. Derivative Financial Instruments and Hedging Activities](index=41&type=section&id=Note%207.%20Derivative%20Financial%20Instruments%20and%20Hedging%20Activities) Outlines the company's use of derivative instruments for managing interest rate risk, including notional amounts and fair values - As of June 30, 2025, the Company held derivatives with a total notional amount of **$5.1 billion**, up from **$4.9 billion** at year-end 2024[103](index=103&type=chunk)[104](index=104&type=chunk) - This includes cash flow hedges, economic hedges, and non-hedging derivatives[103](index=103&type=chunk)[104](index=104&type=chunk) Derivative Notional Amounts by Type (in thousands) | Derivative Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash flow hedges | $675,000 | $800,000 | | Economic hedges | $4,369,120 | $4,072,615 | | Non-hedging derivatives | $11,615 | $10,512 | | **Total** | **$5,055,735** | **$4,883,127** | - The net fair value of all derivative instruments was a liability of **$17.2 million** as of June 30, 2025, a significant improvement from a net liability of **$31.1 million** at December 31, 2024[108](index=108&type=chunk)[111](index=111&type=chunk) [Note 9. Capital Ratios and Shareholders' Equity](index=51&type=section&id=Note%209.%20Capital%20Ratios%20and%20Shareholders'%20Equity) Presents the company's regulatory capital ratios, demonstrating compliance with "well capitalized" requirements and changes in shareholders' equity - At June 30, 2025, both the Company and the Bank exceeded all regulatory capital requirements and were classified as "well capitalized"[142](index=142&type=chunk)[144](index=144&type=chunk) Company (Consolidated) Capital Ratios | Ratio | June 30, 2025 | December 31, 2024 | Minimum Requirement | | :--- | :--- | :--- | :--- | | Common equity tier 1 capital | 13.4% | 13.0% | 4.5% | | Tier 1 capital | 13.6% | 13.2% | 6.0% | | Total capital | 15.9% | 15.5% | 8.0% | | Tier 1 leverage | 11.1% | 11.0% | 4.0% | [Note 15. Pending Merger](index=70&type=section&id=Note%2015.%20Pending%20Merger) Describes the key terms and status of the proposed merger of equals between Berkshire and Brookline Bancorp, Inc - On December 16, 2024, Berkshire entered into a merger agreement with Brookline Bancorp, Inc[199](index=199&type=chunk) - The transaction is structured as a merger of equals[199](index=199&type=chunk) - Under the agreement, each share of Brookline common stock will be converted into the right to receive **0.42 shares** of Berkshire common stock[200](index=200&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=71&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for Q2 and H1 2025, highlighting a 25% year-over-year increase in operating EPS to $0.69 for the quarter, driven by revenue growth and expense reduction. The discussion covers positive operating leverage, an improved net interest margin of 3.27%, stable asset quality, and a strong capital position with a CET1 ratio of 13.4%. The report also details the pending merger of equals with Brookline Bancorp, which is targeted to close in Q3 2025 [Overview and Key Performance Metrics](index=71&type=section&id=Overview%20and%20Key%20Performance%20Metrics) Highlights the company's financial performance for Q2 and H1 2025, including diluted EPS, operating EPS, and key financial ratios - Q2 2025 diluted EPS was **$0.66**, compared to **$0.57** in Q2 2024[202](index=202&type=chunk)[222](index=222&type=chunk) - The non-GAAP operating EPS increased by **25%** to **$0.69** from **$0.55** over the same period, marking the highest quarterly level since 2019[202](index=202&type=chunk)[222](index=222&type=chunk) Key Performance Ratios (Q2 2025 vs Q2 2024) | Ratio | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Return on assets | 1.03% | 0.82% | | Operating return on assets | 1.07% | 0.79% | | Return on tangible common equity | 10.35% | 9.99% | | Operating return on tangible common equity | 10.76% | 9.65% | | Net interest margin, FTE | 3.27% | 3.20% | | Efficiency ratio | 56.73% | 63.40% | - The company is progressing with its proposed merger of equals with Brookline Bancorp, Inc., which is targeted to close in the third quarter of 2025[218](index=218&type=chunk) - Stockholders of both companies approved the required resolutions in Q2 2025[218](index=218&type=chunk) [Results of Operations](index=79&type=section&id=Results%20of%20Operations) Analyzes the drivers of net interest income, non-interest income, and non-interest expense, along with their impact on the efficiency ratio - Net interest income increased by **4%** YoY for Q2 and **3%** for H1 2025, driven by reinvestment of proceeds from securities sales into higher-yielding loans[228](index=228&type=chunk) - The net interest margin improved to **3.27%** in Q2 2025 from **3.20%** in Q2 2024[228](index=228&type=chunk) - Operating non-interest income for H1 2025 increased by **$5 million (13%)** YoY, primarily due to a **$4 million** increase in loan-related fees[229](index=229&type=chunk) - Operating non-interest expense decreased by **$5 million (7%)** in Q2 and **$9 million (6%)** in H1 2025 YoY, reflecting benefits from branch consolidations and sales[231](index=231&type=chunk) - The efficiency ratio improved to **56.7%** in Q2 2025[231](index=231&type=chunk) [Financial Condition](index=80&type=section&id=Financial%20Condition) Reviews changes in the company's loan portfolio, asset quality, deposit levels, and shareholders' equity during the first half of 2025 - Total loans increased by **$114 million (1%)** in H1 2025 to **$9.5 billion**, led by growth in commercial multifamily and commercial & industrial loans[235](index=235&type=chunk) - Asset quality remains favorable, with non-performing loans at **0.27%** of total loans[237](index=237&type=chunk)[238](index=238&type=chunk) - The allowance for credit losses to total loans increased to **1.24%** from **1.22%** at year-end 2024[237](index=237&type=chunk)[238](index=238&type=chunk) - Total deposits decreased by **$396 million** to **$10.0 billion**, primarily due to seasonal runoff of year-end balances[240](index=240&type=chunk) - Excluding seasonal impacts, core deposits grew[240](index=240&type=chunk) - Shareholders' equity grew by **$55 million (5%)** to **$1.2 billion** in H1 2025, driven by retained earnings and favorable changes in other comprehensive income[242](index=242&type=chunk) - Book value per share increased **5%** to **$26.40**[242](index=242&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=83&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is Interest Rate Risk (IRR), managed by the Asset Liability Committee (ALCO) using Net Interest Income (NII) and Economic Value of Equity (EVE) simulation models. As of June 30, 2025, the company's NII sensitivity showed increased asset sensitivity to rising rates compared to year-end 2024, while EVE sensitivity became more liability sensitive, primarily due to assumption updates Net Interest Income (NII) Sensitivity | Parallel Interest Rate Shock (bps) | Estimated % Change in NII (June 30, 2025) | Estimated % Change in NII (Dec 31, 2024) | | :--- | :--- | :--- | | +200 | 6.2% | 2.2% | | +100 | 3.2% | 1.2% | | -100 | (3.5)% | (1.4)% | | -200 | (7.1)% | (2.9)% | Economic Value of Equity (EVE) Sensitivity | Parallel Shock Rate Change (bps) | Estimated % Change in EVE (June 30, 2025) | Estimated % Change in EVE (Dec 31, 2024) | | :--- | :--- | :--- | | +200 | (2.8)% | (1.4)% | | +100 | (1.4)% | (0.6)% | | -100 | 0.7% | 0.2% | | -200 | 1.4% | (0.1)% | - The company's NII sensitivity profile has become more asset-sensitive over the first six months of 2025, meaning net interest income is modeled to benefit more from a rise in interest rates[259](index=259&type=chunk)[263](index=263&type=chunk) - Conversely, the EVE model shows increased liability sensitivity[259](index=259&type=chunk)[263](index=263&type=chunk) [Item 4. Controls and Procedures](index=85&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025. There were no material changes to the company's internal control over financial reporting during the second quarter - The principal executive and financial officers concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by the report[264](index=264&type=chunk) - No changes in internal control over financial reporting occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal controls[265](index=265&type=chunk) PART II. OTHER INFORMATION Covers legal proceedings, updated risk factors, and details regarding equity securities transactions and issuer purchases [Item 1. Legal Proceedings](index=86&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings incidental to its business, none of which are believed by management to be material to its financial condition. Key ongoing matters include a complaint filed by the Bank against Pioneer Bank seeking damages of approximately $16.0 million for alleged breaches of loan participation agreements, and a wrongful termination claim from a former employee of a subsidiary which is proceeding to arbitration - The Company and its Bank are not involved in any pending legal proceedings that management believes to be material to the Company's financial condition or results of operations[267](index=267&type=chunk) - An ongoing case involves a complaint filed by the Bank against Pioneer Bank seeking damages of approximately **$16.0 million** related to alleged breaches of loan participation agreements[267](index=267&type=chunk) [Item 1A. Risk Factors](index=88&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes in risk factors from those identified in the company's most recent Annual Report on Form 10-K. The report reiterates the existence of merger-related risks concerning the pending transaction with Brookline Bancorp. A key condition for the merger, stockholder approval from both companies, was satisfied in May 2025 - There have been no material changes in risk factors from those identified in the Company's most recent Annual Report on Form 10-K[269](index=269&type=chunk) - Risks include merger-related risks regarding the pending merger with Brookline Bancorp[269](index=269&type=chunk)[270](index=270&type=chunk) - A condition of the merger was satisfied in May 2025 when stockholders of both companies approved the necessary proposals[269](index=269&type=chunk)[270](index=270&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=89&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company did not engage in any unregistered sales of securities during the three months ended June 30, 2025. Additionally, the company did not repurchase any of its own shares during the second quarter of 2025 under its publicly announced plans or programs - The Company did not transfer any unregistered securities during the three months ended June 30, 2025[271](index=271&type=chunk) Issuer Purchases of Equity Securities (Q2 2025) | Period | Total number of shares purchased | Average price paid per share | | :--- | :--- | :--- | | April 2025 | — | $ — | | May 2025 | — | $ — | | June 2025 | — | $ — | | **Total** | **—** | **$ —** |

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ___________________ FORM 10-Q ___________________ ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended: June 30, 2025 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to Commission File Number: 000-10661 ___________________ (Exact Name of Registrant as Specified in Its Charter) __ ...

[PART I FINANCIAL STATEMENTS](index=6&type=section&id=PART%20I%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements of Anteris Technologies Global Corp. for the first half of 2025 [Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Anteris Technologies' unaudited consolidated financial statements, highlighting increased losses, cash burn, and going concern doubt [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's operating results, showing widening losses primarily due to increased R&D expenses Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $618 | $632 | $1,174 | $1,398 | | Research and development expense | $(16,340) | $(12,634) | $(32,796) | $(24,189) | | Operating loss | $(20,884) | $(18,471) | $(42,664) | $(36,256) | | Loss after income tax | $(21,062) | $(18,819) | $(42,993) | $(34,972) | | Basic and diluted loss per share | $(0.58) | $(0.98) | $(1.18) | $(1.90) | - The company's operating loss and net loss widened for both the three and six-month periods ended June 30, 2025, compared to the prior year, primarily due to a significant increase in Research and Development expenses[17](index=17&type=chunk) [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, showing a significant decrease in cash and total assets Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents and restricted cash | $28,438 | $70,458 | | Total Current Assets | $32,212 | $74,651 | | TOTAL ASSETS | $39,878 | $80,699 | | TOTAL LIABILITIES | $15,846 | $18,017 | | TOTAL STOCKHOLDERS' EQUITY | $24,406 | $62,761 | - The company's cash position decreased significantly by approximately **$42 million**, from **$70.5 million** at the end of 2024 to **$28.4 million** as of June 30, 2025, reflecting high cash burn from operations[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash movements, indicating increased cash usage from operating activities Consolidated Cash Flow Highlights (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | NET CASH USED IN OPERATING ACTIVITIES | $(41,024) | $(28,903) | | NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | $573 | $(1,363) | | NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | $(1,533) | $15,946 | | Net change during the period | $(42,020) | $(13,906) | - Net cash used in operating activities increased to **$41.0 million** for the first six months of 2025, up from **$28.9 million** in the same period of 2024, driven by the net loss adjusted for non-cash items[27](index=27&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the company's operations, going concern status, segment reporting, and key customer relationships - The company's principal activities consist of the continued research and development of its DurAVR® THV system, compiling data for FDA approval to commence the PARADIGM Trial, and co-developing a heart valve repair device with v2vmedtech, inc[35](index=35&type=chunk) - The financial statements have been prepared on a going concern basis, but the company's recurring losses (**$43.0 million** for H1 2025) and net cash outflows from operations (**$41.0 million** for H1 2025) raise substantial doubt about its ability to continue as a going concern for one year from the issuance date of the financials[49](index=49&type=chunk)[54](index=54&type=chunk) - The company operates as a single reportable segment focused on the development and commercialization of the ADAPT® anti-calcification tissue, primarily for the DurAVR® THV system[89](index=89&type=chunk) - Two major customers, Customer A and Customer B, accounted for a significant portion of the company's revenue in the first six months of 2025 and 2024[97](index=97&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and results, highlighting R&D increases, recurring losses, and the need for additional capital - The company is a structural heart company focused on its lead product, the DurAVR® THV system, for treating aortic stenosis. As of June 2025, **130 patients** have been treated with the device worldwide[100](index=100&type=chunk)[101](index=101&type=chunk) - An Investigational Device Exemption (IDE) for the PARADIGM Trial was submitted to the FDA in Q1 2025. The company anticipates enrollment to begin in Q3 2025, subject to FDA approval[103](index=103&type=chunk) - In Q2 2025, the company focused on strengthening clinical infrastructure and manufacturing capabilities for the PARADIGM Trial, qualifying **79 trial sites** across the U.S., Europe, and Canada[104](index=104&type=chunk) - The company's current cash on hand is not sufficient to fund its needs for the **12 months** following June 30, 2025, and it will need to raise additional capital to fund operations[135](index=135&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, highlighting increased R&D expenses and widening operating losses Comparison of Operations (Six Months Ended June 30) | Line Item | 2025 (in thousands) | 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Net sales | $1,174 | $1,398 | (16)% | | Research and development expense | $(32,796) | $(24,189) | 36% | | Selling, general and administrative expense | $(10,687) | $(12,679) | (16)% | | Operating loss | $(42,664) | $(36,256) | 18% | - R&D expenses for the six months ended June 30, 2025, increased by **$8.6 million (36%)** year-over-year, driven by the upscaling of manufacturing and quality capabilities (**$9.1 million**) and preparatory activities for the PARADIGM Trial (**$2.5 million**)[128](index=128&type=chunk) - Selling, general and administrative expenses decreased by **$2.0 million (16%)** for the first six months of 2025 compared to the prior year, primarily due to lower share-based payment expenses and reduced marketing spend[130](index=130&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's cash position and capital needs, emphasizing the necessity for additional funding - As of June 30, 2025, the company had cash, cash equivalents, and restricted cash of **$28.4 million** and an accumulated deficit of **$319.1 million**[134](index=134&type=chunk)[135](index=135&type=chunk) - Management states that current cash is insufficient to fund operations for the next **12 months** and that additional funds will be required to achieve long-term goals, including the completion of R&D and commercialization of products[135](index=135&type=chunk)[136](index=136&type=chunk) Summary of Cash Flows (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Operating activities | $(41,024) | $(28,903) | | Investing activities | $573 | $(1,363) | | Financing activities | $(1,533) | $15,946 | [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Anteris is not required to provide market risk disclosures - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[157](index=157&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to material weaknesses in internal control over financial reporting - Management, including the CEO and CFO, concluded that as of June 30, 2025, the company's disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting[158](index=158&type=chunk) - The identified material weaknesses relate to (i) a lack of appropriately designed, implemented, and documented procedures and controls, and (ii) deficiencies in the segregation of duties[161](index=161&type=chunk) - Remediation efforts are in process, including documenting processes and controls and reviewing segregation of duties. However, these controls have not operated for a sufficient period to confirm their effectiveness, and the material weaknesses are not yet considered remediated[162](index=162&type=chunk)[163](index=163&type=chunk) [PART II OTHER INFORMATION](index=35&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides additional information on legal proceedings, risk factors, equity sales, and other corporate disclosures [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material legal proceedings are currently active or threatened against it - The company is not party to any material legal proceedings[166](index=166&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors.) There have been no material changes to the risk factors previously disclosed in the company's Annual Report - There have been no material changes to the risk factors discussed in the company's Annual Report[167](index=167&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the allocation of **$80.0 million** net IPO proceeds for DurAVR® THV development and working capital - The company received net proceeds of **$80.0 million** from its initial public offering, which became effective on December 12, 2024[169](index=169&type=chunk) - As of June 30, 2025, the use of IPO proceeds included: - **$37.6 million** for DurAVR® THV development and the PARADIGM Trial - **$14.1 million** for net working capital, v2v expenditures, and other general corporate purposes, including debt repayment[174](index=174&type=chunk) [Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company - Not applicable[171](index=171&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[172](index=172&type=chunk) [Other Information](index=36&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading plans during Q2 2025 - No directors or officers adopted or terminated any Rule 10b5-1 trading plans during the three months ended June 30, 2025[173](index=173&type=chunk) [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with the Form 10-Q, including CEO and CFO certifications - An index of exhibits filed with the Form 10-Q is provided, including certifications pursuant to the Sarbanes-Oxley Act of 2002[175](index=175&type=chunk)[177](index=177&type=chunk)